5-15.1 Evaluating, Rating, and Ranking Suppliers

Performance metrics are tools that enable the Postal Service to objectively benchmark the ability of their suppliers to meet company performance standards. Supplier recognition and rewards are linked to these standards. Once supplier performance is measured, the Postal Service may choose to recognize and reward outstanding suppliers to cultivate the supplier/purchaser relationship. Determining what to measure is the most important challenge of evaluating supplier performance. The metrics used to measure supplier performance should be simple and SMART:

• Specific — metrics are specific and targeted to the area measured.
• Measurable — data that are accurate and complete can be collected.
• Actionable — easy to understand and clear, when performance is charted over time, which direction is “good” and which direction is “bad”.
• Relevant — do not measure everything, but only things that are important.
• Timely — measures for which data are available when needed.

The major metric categories that manage supplier performance, although they may vary in terminology, are:

• Cost.
• Quality.
• Delivery.
• Responsiveness.
• Technology.
• Other metrics may include continuous improvement, value, environmental, etc.

Metrics are reviewed internally and externally by the supplier. The key metrics that are in place should be vital to supplier performance and aligned with Postal Service objectives and strategies.

Metrics are used to create a rating system, which may be weighted to emphasize factors crucial to successful performance. Feedback should be solicited from suppliers regarding ratings to assure buy-in. Ratings are used for:

• Objectively comparing similar suppliers.
• Identifying supplier excellence award winners.
• Aiding future supplier selection (supply base optimization).