Performance measurement of supplier relationships

Abstract

Purpose The purpose of this paper is to develop an analytical model for assessing the performance of supplier relationships (SRs). The majority of performance measurement models incorporate hard quantitative measures that are not appropriate for the soft features of business relationships. As they are usually designed by the customer organisation, they are imposed on suppliers, they do not take into account the relationship as a unit of analysis and therefore they carry a bias in their interpretation. Design/methodology/approach For the development of the model, the nature of a SR is conceptualised in terms of two typologies: one based on the level of its analysis and one based on its genesis and development and the methodology of gap analysis is used. Findings The performance of SRs is assessed in terms of several disparities that exist between the participating parties' perceptions of the nature and their performance to the relationship as well as their perception of their partners' performance to the relationship. The proposed model can be utilised with qualitative (interviews) as well as quantitative (survey) data. The aim of any improvement strategy for the performance of SRs should be to minimise the gaps in partners' perceptions and pursuit the role that the parties play in the relationship and identify those factors that have greater importance to the relationship. Appropriate strategies should be then selected to minimise the gaps in the perceptions of the individuals against these factors. Research limitations/implications The usefulness of the model in assessing SRs' performance lies in the fact that a holistic view of SRs is achieved by taking into account both soft and hard dimensions of SRs. Contrasting the model to other performance management models its major limitation is that it cannot be used as a “scientific” diagnostic tool for suggestion of best practices. Further research is required to identify the causes behind poor performance in a particular area and then devise appropriate strategies. Practical implications The proposed model can be used in different context (manufacturing or services), does not require specialised knowledge or external consulting and provides scope for improvement of relationships between departments within an organisation. Originality/value This paper emphasises the importance of performance measurement of SRs and proposes an innovative for performance measurement model, which overcomes the limitations of existing tools and can be applied in several contexts.

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