Usando a emoção para uma melhor negociação

Using emotions for a better negotiation

Our emotions influence every aspect of life. However, both in our personal and professional lives, keeping our emotions and feelings in check can be a great challenge.

When we talk about the workplace, controlling your emotions becomes fundamental in order to pursue a successful career and in some sectors it must be even greater. This is the case, for example, in the purchasing department, where negotiation processes are common, which demands a lot from professionals.

In this article, we will bring useful information to use emotions in a positive way, which helps you to have better results in negotiations in general. Check it out!

Feelings at the Negotiating Table

Until recently, emotion was considered an obstacle to reaching constructive agreements. But this concept is changing, and now it is suggested that controlling emotion in negotiation can bring positive results.

In the book Building Agreement: Using Emotions as You Negotiate, Daniel Shapiro and Roger Fisher develop the idea that it is possible for the negotiator to stimulate positive emotions and overcome negative ones by showing appreciation and valuing the other party’s membership, autonomy, status and position.

For the authors, the advantage of aknowledging and knowing how to deal with these emotional dimensions is that they can be explored with the aim of understanding each party’s expectations, helping to create a more positive bargaining environment.

As we can see, negotiating depends a lot on the influence of emotions. This is because the successful negotiator needs to have good persuasive and oratory resources, but he also needs to have the perception and control of his feelings.

Studying principles of negotiation, researchers Norbert Schwarz of the University of Michigan and Gerald Clore of the University of Virginia used the phone to ask questions about life satisfaction. Fun Fact: Half of the participants answered the question on a sunny day and the other on a rainy day.

Participants who were contacted on a rainy day showed less satisfaction with life than participants who received calls on a sunny day. But when the scholars began the conversation asking, “How is the weather there?” Participants in a rainy condition responded as positively as those who were experiencing a sunny day.

Why did this happen? Simple: by recognizing the bad weather, the respondents turned off the impact of the rain when assessing their satisfaction with life.

The study therefore demonstrated that negative emotional triggers had to be turned off before negotiations could take place.

Controlling emotions in negotiation

In general, everyone is able to control the way they express their emotions, but there is one strategy that helps to take advantage of this control: control your feelings! In this way, it will be possible to disguise or emphasize an emotion, according to need and moment.

In this aspect, it is essential to prepare in advance for the negotiation. For example, if there is a setback on the way to the meeting, or if you walk into the room and encounter someone you had a confrontational relationship with, these situations must be worked through before you begin to negotiate – that is, in practice, to deactivate the negative emotional triggers!

How to do this? Ask permission to go to the bathroom and take the opportunity to work on your breathing (take a deep, paused breath a few times), do a quick relaxation or meditation, call someone who has the ability to calm you down and give you confidence, etc.

Now, if you notice that the other side has negative emotions related to the negotiation, try to create a bridge with the source of those feelings. It is possible to identify this non-positive reaction through the individual’s speech, but also through body expression, as illustrated by FGV teachers Yann Duzert and Ana Tereza Spínola, in the area of Business Management: contracted lips and eyebrows lowered and joined (means anger), touching the nails or the eyebrow as a sign of impatience.

Questions such as “hard day?” or “how was your journey here?”, aside from creating empathy, can be the starting point to minimize the influence of negative emotions during discussions.

Harvard Business School assistant professor Alison Wood Brooks explains some of the feelings that can appear at a negotiation table: “The most common emotion to appear before the process begins or during the early stages is anxiety. We are more likely to show irritation or excitement in the heat of discussions. And disappointment, sadness or grief often appear especially in the final stages of negotiation”.

All these feelings can be controlled and taken to a more advantageous side during the negotiation process, as explained by Alison, who teaches negotiation in MBA and executive education courses and is a member of the behavioral insights group.

According to her, a useful strategy to reduce anxiety is to invite an outside expert to articulate the negotiation, as these people have less personal interest in the job and can demonstrate more controlled skills.

Anger can arise from the general tendency to view negotiations in competitive, and not collaborative terms. But this feeling, according to the teacher, is not all bad. Demonstrating anger in a controlled way can make people appear stronger and more powerful, which increases their self-confidence.

But if the tension is exaggerated, pressing the pause button is a good strategy. After calming the spirits, the meeting can be resumed in a more productive way.

However, there is a line that divides irritation from disappointment. And that second emotion can already be more damaging when demonstrated at the negotiating table. One of the factors that can cause disappointment is the very fast speed of the process, which brings the feeling that more could have been done. The most obvious way to reduce the likelihood of disappointment is to act calmly and thoughtfully and, if there are any doubts, ask pertinent questions to make sure you have explored all possible alternatives.

As for joy and excitement, Alison says that in certain situations showing these feelings can generate disappointment in the other party. The best negotiators make great deals for you, but make your opponents believe that they too have made a fabulous deal.

And so we come to the last two tips about emotions in negotiations:

  1. Have respect for others, not letting your excitement make your interlocutors feel like losers;
  2. Be skeptical and don’t let your excitement turn into overconfidence, damaging future negotiations.

Emotions are inherent to conflict and play a positive role in decision-making, creativity and relationship building, such as those involving negotiation.

Want more information on advanced negotiation techniques? Check out another article we have produced on the subject: Advanced Negotiation: Prepare yourself for great results

O setor de compras e os impactos da COVID-19 na economia global

The Impacts of COVID-19 on the Global Economy and in the Procurement Department

In addition to the impact on health, the economic consequences of COVID-19 are being felt in all sectors of the economy – due to the slowdown in business investments and consumer spending, as well as industries shutdowns and bottlenecks in logistics.

This is the scenario covered in this article, offering a special focus on the purchasing department. 

The new coronavirus and the impact on the global economy

One of the researches on the impacts of the new coronavirus on the global economy comes from the National University of Australia / Brookings and predicts a drop in GDP in the main global economies in 2020. The report concludes that the damage will be widespread and that policy makers must be willing to invest high to minimize the effects of the pandemic – learn more about the study and the GDP reduction table.

Thus, one of the consequences of the new coronavirus concerns employment. The ILO (International Labor Organization) estimates a reduction that will be between 5.3 million (optimistic forecast) and 25 million jobs worldwide. In addition, the ILO also foresees an increase in underemployment and loss of workers’ income.

Stock exchanges around the world are already accumulating huge declines and, in view of the restrictive monetary conditions, the banking sector is being more cautious in the release of credit. Public finances are not exempt from the new coronavirus crisis and, due to the fall in economic activity, the increase in public debt is considered certain.

The supply chain and the COVID-19

The new coronavirus also impacts supply chains. Many companies had its production interrupted having the supply of services and goods greatly affected.

Those that depend on Chinese products, for instance, suffer even more: currently, more than 20% of the manufactured intermediate goods consumed on the planet are produced in China. Cell phones and other electronics produced in several countries need chips, integrated circuits and other parts produced and marketed in that country, for example.

This dependence even made Bruno Le Maire, Minister of Economy of France, affirm that the COVID-19 pandemic must be seen as the chance to review and change the global supply chain dynamic, so dangerously dependent on Chinese products. He also defends a globalization slow down and the interconnection of the international supply chain.

On the other hand, the supply chain was also impacted by social distance and the panic that led people to the supermarket to generously supply their pantry, requiring from some sectors a significant increase in production and agility in delivery to avoid shortages of provisions- emblematic example is alcohol gel 70 %, one of the most sought products worldwide.

Procurement Department: minimizing impacts of COVID-19

The audit firm KPMG, analyzed the market and released some guidelines on the necessary steps for companies to understand how they are being impacted by the COVID-19.

From these guidelines, we list some tips for the purchasing department to minimize the effects of the new coronavirus on the sector and the organization.

1. Immediate actions

Assess what changes in the organization’s business plans and, more specifically, review purchase planning to ensure that both are aligned.

Another essential step is to assess the risk of suppliers closing or delaying deliveries, identifying how they can affect business and reviewing regional and global flows to see ways to optimize resources.

Map the criticality of the materials used in the production of products that generate greater revenue for the company and review contracts with these suppliers, evaluating the need for new negotiations that meet the new scenario faced by the organization.

Pay special attention to the stock, maintaining the appropriate level of safety, identifying risks that can lead to increased costs and establishing proactive actions to avoid the lack of materials that interrupt production.

2. Medium or long term actions

Learn from the past. Use data from occurrences already faced and that have generated some instability in operations – such as previously overcome economic crises – to make effective decisions, such as: identifying which stock level should be maintained or which supplier profile serves your company with excellence.

Invest in technologies and team training, taking advantage of advanced tools to ensure that all employees are prepared to work remotely. Not only in times of crisis, but through possible needs imposed by the business environment – and without compromising the quality of the services offered.

In the face of COVID-19, purchasing department managers may question the validity of maintaining their operational model based on a large number of suppliers that need to be closely monitored constantly or whether it would be possible to evolve the process into a more practical, agile model that reduce costs and be less vulnerable to unforeseen events like the new coronavirus.

The answer to this question is in the partnership with a company specialized in the purchase of all brands of indirect materials. Soluparts has extensive experience in this regard, having access to the main suppliers worldwide and professionals able to obtain the best prices and terms, even in critical situations such as the one we are going through – get to know our value proposition!

Try our services: get a quote now!

4 Technologies that will change global trade

4 Technologies that will change global trade

The world is changing fast. The growth of the digital economy, changes in international production networks and the speed of transportation are changing the way we conduct foreign trade, making processes more inclusive and efficient. To stay in the market, you need to keep up with these new technologies and trends.

Globalization, transport and communication advancements make technologies and know-how cross borders much faster, increasing the growth and innovation potential of many emerging market companies. According to the International Monetary Fund, “between 2004 and 14, the knowledge flows of technology leaders may have generated, for an average sector of the country, about 0.7% of labor productivity growth per year. This is about 40% of the average productivity growth observed between 2004 and 2014.”

Cryptocurrency

Cryptocurrency and the financial decentralization proposed by blockchain will definitely change the way foreign trade happens as people begin to include this technology in their daily lives. Since it has no central authority, the blockchain is a democratic and transparent system. Learn more about blockchain.

The chain is maintained by the so-called miners. By constantly watching what happens and what is updated on the system, each of them are able to identify and report malware or fraud, making them responsible for each other’s actions. The network can be accessed anywhere on the globe and every information added is copied as in a chain reaction so that it can no longer be edited. All of this global transaction management, tracking, compliance and non editable truth capabilities will surely change the financial transactions as we know. 

Artificial Intelligence and Machine Learning 

Artificial Intelligence and Machine Learning will automate all processes involved in international logistics, as is already the case in other sectors in developed countries such as medicine.

AI will be able to manage vessel and truck traffic at ports, track shipping worldwide, translate ecommerce search queries from one language to another, and respond with translated inventory, for example; The possibilities are endless. In short, this technology will streamline and optimize shipping routes and the entire system will be less prominent to error.

3D printing

There is still a lot of debate regarding the real impact 3D printing will have in international trade. Maybe in the short term, the impact would be close to none, since the reality of mass manufacturing is rather complex. But in a few decades, when 3D printing becomes cheap, faster its mass adoption would decrease 25% in the global trade according to studies. 

Mobile payments

An increasing number of people worldwide is using mobile payments systems such as Alipay in their daily life. World Bank Global Inclusion Database affirms that the access to bank accounts increased by 20% between 2011 and 2014 thanks to mobile phones, especially in emerging economies. Soon enough, companies will start using these systems for their international purchases as well.

 

We can also mention technologies such as Optical Character Recognition (OCR), used to read container numbers, Radio Frequency Identification (RFID) and QR codes to identify and trace shipments in the improvement of reliability and efficiency of global trade. From basic digitization of trade documents to the technologies cited above will make the opportunities of innovation in international trade endless and many challenges will be overcome. 

These innovations will most likely develop faster than the regulations for the industry. In terms of agreements and regulations, the International Chamber of Commerce have been keeping an eye on the changes to adjust incoterms for example, but industries and governments also need to start accepting the big impact of technology and start thinking about options to regulate this market. Some national governments are already responding to this transformations, working on increasing the benefits and to mitigate adverse effects.

“As with every technology and solution, there will be bad actors who deliberately try to cheat or find some way to circumvent the system. Governments need to reward individuals and companies that participate and use the systems as intended and, conversely, need to react swiftly and harshly to those that seek to circumvent the system. “ says David Mounts to Forbes.

The World Trade Report 2018 also points out to some downsides of the technology on world commerce. As said in the report: “while technological advance and trade-opening continue to yield enormous benefits for economies overall, they can also adversely affect specific groups and regions – a problem which a number of countries are currently struggling to address”.

 

Soluparts: Our Value Proposition

Soluparts: Our Value Proposition

Soluparts is an international trading company specialized in purchasing and delivering all types of industrial materials (MRO – Maintenance, Repair, Operations). Our dynamic team and modern systems enables us to offer a fast and reliable service to all our clients. See below what makes us unique.

1- We are agile

Our branches in the US, Germany, Brazil, Portugal and Hong Kong allow us to optimize and leverage materials purchasing and sales logistics, providing our customers with the best supply chain service in the industry: fast, reliable and modern.

2- We connect you to the 5 continents

Soluparts helps you reduce the number of international suppliers, since we have branches in the most competitive markets in the world. Your quotation will reach the most relevant manufacturers on the five continents, and you as our customer will only need the paperwork and time spent on one quotation. Our relationships and connections allow us to find any brand and product you need.

3- Manufacturer warranty

We offer the same warranty as the manufacturer. Should any mishap occur, our customer contacts us directly and we will solve the problem.

4- Experience and trust

Companies in various industries work and trust Soluparts. They know we always achieve expressive results. We have competitive and reliable suppliers in every segment and by decreasing your numbers of registered suppliers you also decrease risks of dealing with many different manufacturers..

We also rigorously check all incoming and outgoing products from our warehouses, ensuring that items shipped to the customer meet their requirements, reducing unnecessary expenses on returns.

5- We are facilitators

We help our customers purchase spare parts and effectively reduce prices, delivery time and bureaucracy. Our customer gathers all their demands in a single quotation request and we will take care of all contact with the various manufacturers, as well as in selecting the best prices and conditions in the market. This reduces ours client’s time in searching and comparing quotes with multiple suppliers. We also do cargo consolidation reducing costs and delivery time, ensuring the best terms.

6- Premium customer service

We have a multicultural and international team, prepared to help you in the best way and in several languages. Each of our consultants knows the needs of each client closely. They are experienced professionals with unlimited access to over 15,000 brands, with the daily mission of offering you the best prices and best market conditions.

Our logistics and purchasing departments are highly efficient, maintaining direct contact with our customers’ logistics departments to ensure all export documents and procedures are following their requirements.

How can we assist you? Do you face any other issues that we do not address in this text? We have experience in solving foreign trade issues and will be able to help you with what you need. Never again will a part be missing from your factory! 

Let’s talk?

 

Incoterms 2020

Incoterms 2020

On September 20, 2019, the International Chamber of Commerce, ICC, published the latest Incoterms update.

The International Chamber of Commerce has been publishing Incoterms rules for over 80 years, reviewing them every 10 years to keep up with new market technologies and innovations, to better represent new business practices, facilitating and making negotiations more accessible.

Incoterms, known worldwide and translated into 30 languages, define the responsibilities of the exporter and importer at each stage of the import / export process, transferring the ownership of the material.

They provide importers, exporters, attorneys, carriers, insurers and students from the international arena with rules and guidelines that reflect the latest developments in the business environment, aligning different levels of insurance coverage, including transportation arrangements, such as modal, safety-related requirements, transportation obligations and costs, among other points.

According to ICC Secretary General John W.H. Denton:

The Incoterms 2020 rules make business work for everyone, facilitating trillions of dollars in global trade annually. Because they help importers and exporters around the world understand their responsibilities and avoid costly misunderstandings, the rules form the language of international sales transactions and help build trust in our valuable global trading system.

The updated Incoterms 2020 list contains the rules for 11 Incoterms. They have already been published and will be effective on January 1, 2020. Therefore, their use is suggested from that date. If importers / exporters wish to consider the Incoterms 2010, this should be added to the documents (eg EXW Incoterm 2010)

Here is the updated list:

1- EXW – Ex Works – At the source, at the given location. It represents the minimum obligation for the exporter.

2- FCA – Free Carrier – Free at the carrier at the specified place of delivery. It is now accepted for sea transportation provided it is in container. In addition, BL will now be released on board and terminal shipping will be accepted.

3- FAS – Free Alongside Ship – Free by the ship at the specified port of embarkation. Incoterm used for loose cargo, ie it is not required to be in a container.

4- FOB – Free On Board – Free On Board at the given port of embarkation. It can also be used in cabotage.

5- CPT – Carriage Paid To – Transportation Paid To Destination

6- CIP – Carriage And Insurance Paid To – Paid transportation and insurance to specified destination. It is now possible to negotiate insurance. In the incoterms of 2010, insurance was 10% of the value of the merchandise, now it can be any value, 20%, 45%, 60,%, and so on.

7- CFR – Cost And Freight – Cost and freight at the designated port of destination. Commonly referred to as FOB + Freight and can only be used for sea and cabotage shipments.

8- CIF – Cost Insurance And Freight – Cost, insurance and freight at the designated port of destination. Like insurance, freight cost can now be negotiated, not exempting the exporter from providing it, which remains mandatory. .

9- DAP – Delivered At Place – Delivered to the given destination location. Exporter fulfills the obligation to deliver the unloaded goods to the place of destination.

10- DPU – Delivered At Place Unloaded – Delivered to the specified destination landing location. It forces the exporter to unload cargo at the importer’s destination.

11- DDP – Delivered Duty Paid – Delivered duty paid at the specified destination. Unloading can be negotiated, which does not guarantee that it will be accepted, but the goods must be cleared for importation at the designated place.

Why-is-the-purchasing-department-so-strategic

7 strategic KPIs for the purchasing department

Do you know what the best strategies have in common, other than absolute success?

Some researches show that more than half of the companies consider themselves more successful just because they keep a closer look on performance indicators. And those companies are not wrong!

Basically, keeping a closer eye on performance indicators is the best way to determine the results of your strategy – which decisions were right, which were not, how much money was saved or lost in the process… It’s all about the data!

Within a company, every department has its own indicators, which display the quality and efficiency of the work. Which indicators are used to measure the performance of your department in your company?

Here, we like to use KPIs!

Key Performance Indicators

Key Performance Indicators (KPI’s) are a group of parameters used to evaluate the performance of different areas of an organization. This type of management emerged in the early 90s, and is now considered the best way to keep up with the most important metrics in each sector of any business.

KPIs are relevant not only because they allow measurement and performance evaluation in each department, but also and mainly because they make it easier for the manager to see where are the rights and wrongs, and which areas need more investment and attention.

KPIs in the Purchasing Department

The purchasing department is one of the most important in any business, be it large or small. This sector is responsible for mediating the company’s relationship with suppliers: from the choice of best supplier at the best price and quality required, to the control of performance standards, without an effective management the purchasing department is left disorganized and can be accountable for large losses – and even the bankruptcy of the company.

To measure up the performance of the purchasing department, KPIs cannot be forgotten! Let’s go through the 7 most essential KPIs to keep up with the purchasing department:

#1. Delivery

This KPI measures how well the purchasing department is when it comes to finding what the organization needs when it needs it.

How to measure: Number of on time deliveries / Total number of deliveries per supplier

Important: the company should not penalize a supplier for missing delivery dates if the lead time required by the supplier is not complied by the company or a change was requested at the purchase order. These two situations need to be taken into consideration when calculating this metric.

#2. Cycle time

It’s the average amount of time spent between the moment when the requisition from another department is submitted and the placement of the purchase order. In other words, the time the purchasing department takes to fulfill the needs of the organization.

How to measure: Moment of purchase order placement – Moment of requisition submission

This metric is usually measured in day and it excludes the supplier lead time.

#3. Supplier lead time

It’s the average amount of time spent from the moment of the order placement until the delivery.

How to measure: Moment of delivery – Moment of order

This metric is also measured in days and must be measured per supplier. It relates directly to the Delivery KPI.

#4. Quality

It’s important to keep track of the quality standards, which means knowing exactly if the goods purchased fulfill the needs of the company. If they do, great. If not, a change of supplier may be necessary – read here about compliance in the purchasing department.

How to measure: Amount of rejected items / Total amount of items ordered

This metric is usually calculated on a monthly basis.

If the percentage is too high, an analysis must be held to determine why the items are being rejected – if it’s due to problems with the supplier, with the purchasing orders or something else. To improve your purchasing department’s strategy read our article about Strategic Sourcing.

#5. Inventory risk

The obsolescence of goods is a real problem for companies that make large purchases. Over time, the entire inventory can become obsolete, and the money spent to buy and maintain them goes down the drain – read here the applications of the Opex and Capex concepts, considering the 4.0 Industry era. 

How to measure: Amount of money lost due to obsolescence / Total worth of the inventory

This metric is usually measured on a monthly basis, but could also be by trimester or semester.

Soluparts can help you find obsolete spare parts: send us a request for quotation. 

#6. Employee Learning

This metric should be used more by all companies, big and small. Here, the purchasing manager must verify if the personnel are striving to deliver more quality and efficiency at work.

Keep tabs on the number of purchasing employees with certifications that improve their performance on the job. The certifications can be college degrees, participation in lectures, specializations, MBAs, etc. The more they search for knowledge and improvement, the better for the company – check out 3 essential skills for purchasing professionals to stand out in the digital age.

This is a very good way to find out if the team feels motivated and driven, and also to reward the employees who show the biggest efforts of improvement. Finally, it’s an easy way to realize the need to provide training to the team.

#7 Cost

Here, we are looking at 3 metrics.

Number one is the Cost Avoidance, that helps the purchasing team find the lowest price for the same good among suppliers.

Here’s how you calculate it: Actual Purchasing Price – Lowest Price Quoted

Number two, Cost Saving. This indicator differs from the latter as it shows how much the department has been able to save when buying the same good, from the same supplier, for the second time, for a lower price. It demonstrates how well the department is at negotiating.

It can be calculated as: Actual Purchasing Price – Last Price Paid

Last, but not least, is the well-known ROI, Return Over Investment. It shows if investments were made wisely, if the return is positive. If it’s negative, it means that something went wrong in the process, and the company is losing money – See here the best way of comparing quotation.

ROI = (Cost Saving + Cost Avoidance) / Cost of Purchasing Operation

Conclusion

These 7 are just examples of KPIs that you should follow in your company!

By keeping up with these indicators, your purchasing team will be able to better understand the purchasing habits of the company, the performance of suppliers and if the procedures are working as they are supposed to. This way, it becomes easier to make changes in staff, reallocate investments, and, in short, assess the issues and find the appropriate solutions.

Other than analyzing KPIs do you keep up with the new technologies for the purchasing department? We have some articles in this regards you will enjoy reading:

The purchasing sector in industry 4.0
Benefits of an intelligent supply chain
The second wave of industry 4.0

Soluparts – a global company with offices in Brazil, Germany, Portugal, Hong Kong and the United States – can connect you to the most relevant manufacturers around the world.

We specialize in purchasing all types of industrial materials and have access to thousands of products and suppliers from around the world – Send us a request for quotation. 

 

How-to-monitor-your-suppliers-performance-1

How to monitor your suppliers’ performance

Hiring a supplier involves several steps. The first one is a survey, in which all the options of suppliers are evaluated, followed by the elaboration and signing of a contract.

In the contract, all conditions for the provision of service or purchase are established: prices and payment terms, deadlines and delivery terms and other details, everything is agreed in the contract between company and supplier.

However, in addition to the contract, it is essential to follow up on the suppliers’ performance at all stages in which they are involved. This monitoring is not always carried out, mainly because the managers do not know the right way to or what they should accompany. The quality of products in deliveries, delays and problems and even a pro-activity of the supplier are points that can be measured and evaluated, for example.

Check out a few criteria that you need to track to monitor any suppliers’ performance, and how best to evaluate each one:

 

Quality

 

It is of the utmost importance to establish and maintain quality standards aligned between your company and each of the suppliers. To do so, monitoring the quality of the services provided is essential. After all, if this monitoring does not happen, the supplier can’t know ig the quality standards are aligned, if the company is satisfied and if there is a possibility of disruption of business relations.

One very important quality criterion to keep track of is a quantity of items that are rejected per delivery. This index says about the supplier’s concern to ensure that deliveries are made according to the customer’s request.

For this criterion, companies usually measures in PPM, parts per million, scaling how many PPM were delivered damaged or were rejected. The company should set an acceptable standard of quality problems for each type of delivery, and use this standard to evaluate the performance of each supplier.

In addition to monitoring, it is important to make those standards clear when contracting suppliers. Thus, the supplier who disrespects company quality standards should be penalized and even excluded from the list of service providers, depending on the extent of the situation.

 

Performance

 

Another set of criteria that should be presented are those related to the performance of deliveries. When you close a contract, it contains the dates on which the products are to be delivered or the services provided, and this date is to be followed strictly.

In the meantime, companies typically engage in a “standard deviation” of delivery dates, about 1 day before and 1 day after the date previously set. This deviation exists to foresee incidents in the delivery, and a margin of error is also established for undelivered goods – about 10% of the total order.

Of course, the ideal scenario would be delivery on the agreed date, in the correct quantity and without damage or rejected parts. In the case of services, the ideal would be that they were provided within the contracted term, without a need for contracting services that were not foreseen.

However, accidents and all sort of events can occur, and therefore, establishing an acceptable deviation is a better way to monitor the performance of your suppliers. So, keep strict control over respect for dates and results, while safeguarding an acceptable range of errors, and assign scores to each supplier on those issues.

On a scale of 0 to 10, for example, a supplier only scores a 10 if their deliveries perfectly match the three requirements: term, conditions and appropriate quantity.

 

Other evaluation criteria

 

It is also possible to assess supplier performance through its position on some negotiating fronts. Evaluate whether the vendor is open to reducing costs based on your bids and making payment terms more flexible. This shows the supplier’s desire to maintain a long-lasting relationship with your company.

Another possible option is to evaluate the transparency of the supplier, in the sense of providing previous customer contact information, with which you can seek references, as well as data such as company involvement in labor lawsuits and other charges, for example. That says of the suitability of the company, and your organization only has to gain by doing a full checking job of the suppliers to which it unites.

 

Analysis of supplier performance

 

After evaluating suppliers’ performance, assigning notes and making the necessary observations, it is important to analyze these data. For suppliers who provide the same type of service, it is interesting to draw a comparison between the notes and observations, and thus decide on the permanence of both or give preference to one of them.

For all suppliers, it is important to assess the feasibility of keeping them within the company. If a supplier does not perform in line with company standards, it is worthwhile to schedule a meeting and review the terms of that partnership, and even consider canceling the contract.

Providing constant feedback is the best way to pass these evaluations on to suppliers, enabling them to make improvements to their internal processes and keep an eye on the relationship with your company. Thus, it is possible to avoid extreme situations of dissatisfaction between the parties.

These evaluations are also a great way to analyze the workings of the processes involved in managing your company’s supplies, and to find loopholes and problematic points. In this way, the company gains not only by maintaining the best contracted suppliers, but also by constantly testing and optimizing management processes and methods.

How do you monitor supplier performance in your business? In addition to keeping files with this cataloged data, it is also possible to use automated systems and even joint worksheets to group the data and analyze the performance of each supplier.
We hope you have learned a little more about the importance and different ways of measuring the performance of the suppliers you hire. Share this article and help more colleagues improve their relationship with suppliers!