Which Vendor Performance Metrics Should You Be Tracking in Distribution?
In distribution, relationships are everything. They’re essential for maintaining a steady flow of repeat customers and getting the right products from the right suppliers in the right hands at the right time. The distribution industry has always looked to specific metrics to understand business performance, and the foundation of strong relationships should include evaluating and meeting expectations when measuring vendor performance.
Reviewing, reevaluating, and regularly adjusting your key metrics as they relate to assessing your vendors’ performance will be an ongoing management process. Key performance indicators should serve as stepping stones along your path of overall continuous improvement, and tracking KPIs for monitoring vendor performance and management should be no different.
Vendor Performance Management: Where Distributors Struggle
Maintaining strong vendor relationships is crucial for achieving stable growth. Your top suppliers likely have their own key performance indicators, but if your procurement team often struggles to provide reports to them in a timely manner, you’re not alone. Filtering data from your ERP system to display only certain product categories or units sold from one of your many individual suppliers can be a frustrating endeavor.
Why Vendor Performance Is Critical in Distribution
Your ability to meet customer demand depends on whether you have reliable, high-performing suppliers; it’s absolutely crucial to know which of your suppliers contribute the most to your revenue, and which ones need improvement.
By focusing on vendor performance metrics, distributors can ensure they are working with the best suppliers and identify areas for improvement in their supply chain. This approach leads to better inventory management, less supply chain disruptions, greater customer satisfaction, more cost management, and ultimately, more sustainable growth.
Not only that, but having insights on individual suppliers and their products can strengthen a distributor’s relationships with their suppliers. Tools like White Cup BI transform raw data into vendor scorecards so that distributors can see and share with their suppliers the kind of metrics that matter in negotiating the best deals. White Cup can help strengthen your case for better terms, price negotiations, lower minimums and even exclusivity by arming operational teams with performance insights at the individual supplier level.
Key Performance Indicators and Vendor Metrics To Measure
With a tool like White Cup BI, distributors can unearth critical metrics to evaluate and potentially even share with suppliers to identify trends and opportunities for further improving vendor performance and management process optimization.
Value of Orders Received – This provides a big-picture perspective so that you can get insight into an individual supplier’s impact on your business’ overall performance and growth trajectory. It also allows you to compare year-over-year performance to better gauge progress, measure performance, identify trends, and make informed strategic decisions to drive profitability.
Percentage Lines Filled – Uncover insights about operational efficiency monitoring supplier performance, and customer satisfaction by closely monitoring the percentage of individual items within orders that are successfully filled/shipped on the first attempt without backorders, delays, or substitutions.
Average Lead Time – Average lead time by supplier allows distributors to identify clear trendlines and make informed decisions about which suppliers are consistently meeting delivery performance expectations. Comparing an individual supplier’s lead time with the average across the rest of your supplier base will help you identify areas for optimization.
Average Value Per Order – Identify the average value per purchase order – especially juxtaposed against the cost of goods sold – to identify opportunities for margin optimization, cross-sells, and upsells.
Cost of Goods Sold – Get a clear view of direct costs incurred to acquire products from a certain supplier during a specific period so that you can make better pricing decisions and ensure sustainable business objectives and financial management.
Turns Percent, GMROI Percent, and Profit Percent, as compared to company averages – Find out just how effectively inventory is being managed, capital is utilized, and overall profitability of products by comparing actual performance on these metrics across company averages. Deviations from the norm signal risks and areas of improvement to guide strategic partnership adjustments and protect financial performance.
Open Purchase Orders To Discuss – Monitor and follow up on large open purchase orders to effectively unlock opportunities to collaborate with vendors, and potentially pull them into your customer conversations, to close open deals.
Top 10 Products With Increasing Sales – Capitalize on market trends, celebrate wins with an individual supplier, allocate resources effectively, and optimize inventory levels with insights into trending products. Identifying these top-performing product trends can inform co-marketing initiatives and product development initiatives, to accelerate growth.
Evaluating Vendors With Better Business Intelligence
Enhanced business intelligence empowers distributors to comprehensively evaluate vendor and supplier performance across various metrics, from sales trends to order accuracy and more. Distributors can bring these metrics to the negotiating table with their suppliers to strengthen terms and relationships, and strategically optimize their supplier networks to maximize their profitability.
Distributors Successfully Managing Supplier Performance With White Cup BI and CRM
White Cup BI and CRM tools are giving distributors innovative and unparalleled insights into their business performance to enhance their supplier relationships. These tools bolster effective supplier performance management for leading distributors, giving them clear insights to performance targets that matter most.
E.B. Horsman & Son: A New Way To Manage Vendor Performance
For an electrical distributor with more than 600 suppliers, reporting on product sales is a crucial part of managing performance and maintaining and expanding relationships with vendors. E.B. Horsman & Son had developed its own internal systems to organize and report on data from its ERP, Epicor P21, but it was a time-consuming process.
With White Cup BI, the company now can run weekly, even daily, reports on its core products, something it never would have been able to do before. Vendor scorecards make it easy to track vendor performance and show suppliers the costs of goods sold and other relevant data — in some cases, data the suppliers aren’t able to access within their own organization.
“It has boosted our credibility,” Todd Taverner, E.B. Horsman & Son’s VP of Purchasing and Inventory, said. “We’ve had some vendors actually emulate what we’re doing on the BI side of things.”
Mar-Hy Distributors: Vendor Performance Data at a Glance
Like E.B. Horsman & Son, Mar-Hy Distributors was looking for a solution that could integrate with Epicor 21 to surface vital insights on product sales, supplier performance, and more. While they could export data from P21, the team couldn’t easily filter data into reports to meet specific needs — such as reporting certain key performance indicators. Without easily accessible product and sales data, it was difficult to report on overall performance standards, business and supplier performance evaluation or identify areas for improvement.
“It’s been easier to immediately notice a trend a month or two ahead of time because White Cup is looking at many more data points and displaying it in a way that shows trends,” Eric Schmidt, VP of Operations at Mar-Hy, said. “There is nothing in P21 that gives you that really quick snapshot outside of the monthly sales report.”
While implementing a new ERP, BI software, and document imaging solution was a lot of change to manage at once, Schmidt said White Cup BI was the easiest part of it. Because of the White Cup team’s experience mapping data to ERP systems, they could integrate the systems seamlessly.
Clayton Controls: Effective Supplier Performance Management
Longtime company owner John Allard recognized that his company, Clayton Controls, was struggling to grow due to the lack of integration between the company’s ERP and CRM systems. Implementing White Cup’s CRM with Epicor P21 set the foundation for newfound collaboration and opportunity, especially in Clayton’s Controls’ supplier relationships.
Because of the complexity of projects Clayton Controls supports, a single opportunity and corresponding quotes could involve products from numerous vendors, including those specializing in robotics, conveyors, and hydraulics. A deep integration between the company’s CRM and ERP allows sales reps to create quotes that include exactly the products and SKUs in their inventory, according to P21. This helps the team more accurately forecast demand. They can easily filter data by vendor and by product to help their manufacturers plan ahead as well.
“Back in the day, as long as you had the sales numbers, you were great, now I need to have a lot more leading indicators to show the vendor. When I can show them activities, projects, and where they are in the sales funnel, I can show them I’ve got engagement here,” Allard said.
Enhance Supplier Relationships With White Cup CRM and BI
When it comes to overall business health and profitability, top distributors like E.B. Horsman, Mar-Hy, and Clayton Controls know there’s more to the story than total sales. White Cup helps these distributors use supplier relationship management and performance metrics to enhance their relationships, improve performance, and drive business growth. Equip your team with powerful new insights and transform the way you do business with White Cup.
Supplier Performance and Vendor Management FAQs
Managing supplier performance data is a strategy that involves continuous improvement. Take a look at these commonly asked questions to refine your supplier performance management efforts.
How can distributors overcome challenges in extracting relevant data from ERP systems?
ERP systems alone can’t provide distributors with comprehensive data insights because they primarily focus on transactional data. Business intelligence tools, when integrated with a distributor’s existing ERP, enable the analysis of broader datasets, such as customer behaviors, market trends, predictive analytics, supplier performance management, and more. White Cup BI synthesizes all of this data into hundreds of pre-built dashboards and reports, surfacing insights to drive more informed decision-making and strategic planning.
How can distributors address supply chain issues like late orders from suppliers?
Distributors can leverage individual supplier performance data to better manage supplier relationships with White Cup BI. Metrics like White Cup BI’s Average Lead Time identify trends and help distributors address recurring issues.
What are the benefits of sharing top product insights with suppliers?
Knowing and sharing top product insights with suppliers can give distributors more credibility in contract negotiations with multiple vendors and provide new opportunities for the two entities to optimize business development efforts, supply chain management and inventory levels.
How should distributors approach vendor management if they have a large number of suppliers?
With a large number of suppliers, distributors must invest in the tools and technology to get clear performance insights at the aggregate and individual supplier levels. If they want to drive sustainable business growth, distributors need to know which suppliers are high performers and which ones present opportunities for improvement. White Cup BI + CRM technology solutions equip distributors with decision-enhancing insights to take their business to the next level.