Vendor performance Management CPPC conference

PERSPECTIVES ON VENDOR

PERFORMANCE MANAGEMENT:

LET’S MITIGATE THE RISK

Vancouver 2012 Gerald Ford & Arthur Skuja

What is Vendor Performance

Management?

It is a business practice that is used to measure, analyze, and manage a supplier’s performance in an effort to cut costs, alleviate risks, and drive continuous improvement.

The ultimate intent is to identify potential issues and their root causes so that they can be resolved as early as possible.

What is Audience Response

Technology?

Audience Response Technology is an interactive tool

which allows YOU to weigh-in in real time using

simple intuitive polling software and response

devices.

Corporate sponsor:

Which image best describes how you feel

today…

1 2 3 4

32

02

5

1. 2.

3.

4.

Things less painful than an eight minute survey

Survey Says!

Top 8 answers on the Board

Stick in the eye

Salt on open wound

Pocket full of bees

A punch in the ….

14

12

8

5

Case Study: Ministry of

Transportation Ontario

MTO uses the Registry, Appraisal & Qualification System (RAQS/MERX) to manage vendor qualification and vendor performance for infrastructure procurement

RAQS/MERX is an integrated procurement solution with support for:

MTO user roles

Process workflows

Internal system data flows

Internal and external communications

MTO Approach to

Vendor Performance Management

Vendor performance, qualifications and ratings are

linked

Vendor qualifications and ratings are tied to fixed

categories of work

Rating assessments are subject to formal workflows and

based on detailed contractor information

Published tenders refer to required categories of work

and required ratings

RAQS/MERX Key Processes

Vendor management Vendor registration & qualification

Vendor performance assessment

Vendor rating

Project tendering Project notice advertising

Document distribution

Contractor communications

Bid results and evaluation Results evaluation / trend analysis

Awards and Work On Hand update

MTO Vendor Qualifications

Qualifications based on detailed vendor information:

Financial assets

Financial liabilities

Business information

Litigation

Experience

Work on Hand

Equipment

Key personnel

MTO Vendor Performance

Management

Vendor contract performance evaluation is focused on key parameters

Quality

Safety

Timeliness

Execution

Any performance issues reported immediately

Infractions

Warnings

MTO Vendor Rating

Vendor ratings are expressed as dollar values

Ratings are used to assess capability for vendor to do

work and bid on new projects

Ratings are calculated based on: Qualification data

Work on Hand

Performance and infraction data

Vendor Selection Process

Transparent procurement process

• Advertisements open to the public

• Categories of work and dollar value rating identified

• Contractors apply for permission to bid

• Only qualified vendors with an adequate rating are

approved to bid

• Supported by workflow & appeal process

Benefits of the MTO Approach

Open process promotes competition

Higher quality bids only from qualified contractors

Detailed vendor information supports better decision making

Lowers costs by reducing need for bonding

Integrated system supports consistent processes supported by audit trails

How do you compare to MTO - which

sector are you in?

1 2 3 4 5 6 7

8

6

0

16

1

44

1. Municipal

2. Academic

(University/College)

3. School Board

4. Health Care

5. Broader Public Sector

6. Private Sector

7. Federal/Provincial

How many employees work for your

organization?

2 3 4 5 6 7 8 9

0

2

1 1

14

9

7

3

1. 1 to 9

2. 10 to 24

3. 25 to 99

4. 100 to 249

5. 250 to 499

6. 500 to 999

7. 1000 to 2499

8. 2500 +

Other than CPPC which Organization(s) do

you belong to? Pick as many as you would like!

1. OPBA

2. OIPMAC

3. NIGP

4. OECM

5. CMC

6. HSCN

7. Construction Association

8. ISM

9. Other

10. None 1 2 3 4 5 6 7 8 9 10

5

20

13

1

4

11

1

4

3

0

Survey Says!

OPBA = Ontario Public Buyers Association

CPPC = Canadian Public Procurement Council

NIGP = National Institute of Governmental Purchasing

OECM = Ontario Educational Collaborative Marketplace

CMC = Canadian Association of Management Consultants

HSCN= Healthcare Supply Chain Network

How many competitive bids did your

group issue in 2011?

1. 1 to 49

2. 50 to 99

3. 100 to 149

4. 150 to 199

5. Greater than 200

1 2 3 4 5

9

11

13

4

1

180

How many competitive bids did the

Town of Oakville issue in 2011?

On average how many vendor performance

evaluations do you do per year?

1 2 3 4 5

9

14

10

0

4

1. None

2. 1 to 10

3. 11 to 25

4. 26 to 49

5. 50+

Survey Says!

Which tools or methods do you use? Pick as many as you would like!

1. Checklists

2. Forms

3. Templates

4. User Guides & Manuals

5. Progress meetings

6. Performance

documentation

7. 3rd Party verification

1 2 3 4 5 6 7

17

16

15

8

1717

8

Which tools or methods do you use?

What triggers an evaluation?

1. Periodic

2. Budget Threshold

3. Contract performance

4. Project profile

5. New vendor

6. Project complexity

7. Client Dissatisfaction

8. Repeat vendors

9. Length of Engagement

10. Every Project

1 2 3 4 5 6 7 8 9 10

10

9

19

6

8

9

1

19

11

6

Survey Says!

Problems with Purchasing and Supply

Chain Measurement and Evaluation

27

Too much data

Wrong data

Measurements that are short-term focused

Lack of detail

Drive the wrong performance

Measures behavior vs. accomplishments

Leopold Koff, B.A., B.Ed., CPSM, CPM, CSCMP

Professor, Supply Chain & Operations Management

School of Business & Hospitality

Examples of Automated Systems

TQRDC

VPM

On a scale from 1 to 5, what is the average score you

give to your contractors when you do evaluations?

1. Poor

2. Acceptable

3. Standard

4. Good

5. Excellent

1 2 3 4 5

23

1

1313

Central tendency State of Florida

3%

66%

31%

0%

10%

20%

30%

40%

50%

60%

70%

>= 1.00 to <= 2.80 >= 2.81 to <= 3.20 >= 3.21 to <= 5.00

Overall Rating

Overall Rating

5105 Surveys conducted in April 2010

Simplified 3M team rating (TQRDC)

T – Technology

Q – Quality

R – Responsiveness

D – Delivery

C – Cost

Courtesy: Jeff van Geel

Manager Sourcing & Accounts Payable

Courtesy: Jeff van Geel

Manager Sourcing & Accounts Payable

Simplified Scorecard

1. Focus on improvement

2. Present facets of performance without

aggregation. Do not dilute message.

3. Communicate dashboard – detail in meeting

4. Scope: all material & services Courtesy: Jeff van Geel

Manager Sourcing & Accounts Payable

All information for exercise only

Courtesy: Jeff van Geel

Manager Sourcing & Accounts Payable

ABC Contracting

Grand River

Excavation

Ford’s

Landscaping

For ratings

that are

“Below

Standard”

and

explanation

must be

entered

Easy to create, fill out and explain!

The “below Standard” Comment

Easy colour

coding to spot

what needs to

be reviewed

quickly. Data

can be exported

for further

calculations if

required.

1 2 3 4 5 6 7 8

23%

6%5%

6%

18%

12%

11%

20%

1. Effective communication throughout

engagement

2. Quality of resources

3. Availability of resources to carry out

contract

4. Quality of the final deliverables

5. Providing value added services

6. Maintaining timelines/deadlines

7. Budget/cost control

8. Having a vendor contact for dispute

resolution

What is important for an effective engagement? Pick in order of priority. 1st , 2nd or 3rd most important

Survey Says

What are your greatest challenges to

having an effective VPM!

1 2 3 4 5 6

15

12

6

10

0

4

1. Not enough time

2. End user input difficult to get

3. Poor systems

4. Not required

5. Missing linkage between contract and

performance

6. Comparative Consistency

Is the use of bonding a viable alternative

to vendor performance management?

1. Yes

2. No

3. Depends

1 2 3

9

16

11

Do you share performance results with vendors?

1. Yes

2. No

1 2

6

25

Do you tie VPM data to proposal evaluations

and vendor selection?

1. Proposals

2. Evaluations

3. Both

4. Neither

1 2 3 4

2

12

87

Do you tie vendor qualification to

specific procurements or a general

work or product category?

1. Specific

2. General

3. Product Category

1 2 3

21

3

6

1.Construction – Commodity - Contract

2.Contractor - Consultant

3.Consistency - Customizable

4.Crowdsourcing – Collaborative - Comments

5.Compare - Contrast

6.Credible – Context

7.Cost

And how do you feel now?

1 2 3 4

18

566

1. 2.

3.

4.

Gerald Ford CSCMP grford@csolutions.org

905-296-4003

226-474-1169

Arthur Skuja

askuja@merx.com

613-727-4917