Supplier performance management (SPM) definition

Contributor(s): Brenda Cole

Supplier performance management (SPM) is a general term for any business practice that is designed to manage, measure and analyze the accomplishments of a provider in a supply chain

Manufacturers adopt supplier performance management plans to reduce costs, lower supply chain risk factors and promote continuous improvement. When SPM is successful, it identifies potential supply chain executionissues early on, giving manufacturers the opportunity to quickly resolve them.

Suppliers that are examined under an SPM plan are typically measured against two factors: the expectations agreed upon in their original contract and the current performance norms of their particular marketplaces. SPM also highlights any performance gaps and failures to meet previously agreed upon expectations.

Ultimately, SPM can extend the lifetime of a supplier contract by ensuring that certain levels of performance are met during the beginning of a partnership and on a continuous basis afterward. SPM is particularly crucial for companies dealing with a complex or global supplier network.

See also: supply chain planning, gap analysis

This was first published in July 2014

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