How can supplier performance management support supplier relationship management?

Supplier Performance Management and Supplier Relationship Management are essential to the construction procurement process and supply chain landscape – but what does that mean in the existence of a digital era? 

Surrounded by ongoing digital transformation across various industries, it’s important that construction stakeholders keep up and adopt tools to support the overarching mission of building a safer future for all.

But what’s the difference between the two? And what roles do they play in the construction environment? In this blog, we distinguish the key differences between Supplier Performance Management and supplier relationship management, why they are important in construction, and how to manage supplier performance within construction supply chains.

What’s the difference between Supplier Performance Management and Supplier Relationship Management? 

To maximise the true value of Supplier Relationship Management, you need Supplier Performance Management software to help evaluate the performance of your suppliers across your entire construction supply chain properly. 

How can teams differentiate the fine line between supplier performance management and supplier relationship management?

Supplier Performance Management (SPM) is the foundation for supporting Supplier Relationship Management (SRM), as teams cannot be expected to manage relationships from scratch. In short, they complement each other. One can’t work without the other: there needs to be a reason to nurture them towards a common goal, such as improving businesses’ bottom line, with the hope they can work together again. 

Supplier performance management provides the basis for supplier relationship management: relationships can’t be managed from nothing! It focuses more on the quantitative measures, whereas supplier relationship management is focused on managing quality over time, sometimes through supplier feedback sessions and looking at past learnings. 

Overall, the two focus on how to work together more when a construction project has been completed and performed well, promoting main contractors to think about how they can work with suppliers closer on future projects. 

What is Construction Supplier Performance Management? 

Increasingly used by procurement and supply chain buyers, and main contractors, Construction Supplier Performance Management helps them develop familiarity with suppliers and subcontractors over a long period of time, supported by quantitative measures such as agreed key performance indicators. 

The aim of supplier performance management is to develop familiar trading relationships but not overcommit, based on how other main contractors may have evaluated a subcontractor, based on past experiences with them.

It provides an easy, low-risk method of engaging with suppliers, where main contractors can evaluate which factors are important to them when completing a project, such as price, quality and availability. It develops trust and an understanding that each will fulfil their side of their agreement: the supplier completes work OTIF (on-time, in-full), to the agreed quality, and the buyer pays when they’re happy.

One of the most important factors, is that quality is consistent. Moreover, availability to avoid supplier disruption and delays to their projects. 

What is Construction Supplier Relationship Management? 

Construction Supplier Relationship Management focuses on the quality aspect of nurturing and managing close relationships on an ongoing basis with subcontractors. Used across most industries, procurement and supply chain teams strategically focus on these relationships to manage their third-party suppliers effectively and help deliver on their corporate strategy. 

Construction supplier relationship management prompts a main contractor to ask:

As a result, it encourages teams to think about how they can get the most value from their connections, so they can work together to aid business performance (or a shared interest). 

Why is Supplier Performance Management important in the Construction industry? 

In order to maximise supplier relationship management, supplier performance management is required to evaluate metrics properly. With supporting data, decisions can be made, otherwise it turns into a blame game.  

For construction main contractors in particular, supplier performance management is a vital way of making sure they’re staying on track with their projects but also choosing the right suppliers to work with in the first place.  

The last thing main contractors want is to face project delays, but also to avoid working with suppliers that could pose a risk. Construction Supplier Performance Management software can help Buyers get advanced notice on suppliers with ‘red flags’ to support with their construction risk management processes. For example, past main contractors may report: 

• • Experiencing late or incomplete deliveries 
  • Poor quality in project delivery 
  • Difficult getting in contact with the supplier / poor communication 
  • Price increases, unrelated to the market 
  • Poor customer service / difficult to work with 
  • Invoicing errors 

So, what tools can main contractors use to avoid experiencing issues like this? 

How to manage Supplier Performance in construction supply chains 

Supplier Performance Management by Once For All helps you maintain quality in your projects, by helping you evaluate suppliers before choosing to work with them. 

Where projects require stringent measures to build safely, main contractors need the assurance their supply chain meets certain requirements, such as compliance with the Common Assessment Standard, or certain aspects of the Building Safety Act. They want to work with reliable subcontractors and avoid delays, especially when margins are already tight within the construction industry and prices can change quickly after any global event. 

Fortunately, our solution supports teams with this process, to help provide the basis for their evaluation procedure. From here, main contractors can communicate results not only internally, but also with other suppliers. This makes supplier performance management useful to proactive suppliers that are looking at ways to keep improving and getting better.

Many main contractors choose to evaluate suppliers based on key performance indicators: this can be anything from project delivery and quality, through to pricing, compliance, and health and safety standards. Once a project has been completed, tailored questionnaires are sent to the project and supply chain managers, who provide feedback on their experience with past suppliers.

Explore our Supplier Performance Management solution’s full capabilities. 

Numbers and trust work together: as a result, main contractors can make decisions based on other buyers’ experiences with suppliers they are looking to work with, and either avoid troublesome suppliers, or choose highly rated ones that align with their project goals and strategy. 

Why should you use a construction supplier performance management solution? 

One of the key reasons main contractors should use a construction supplier performance management solution is to oversee their external supply chain members, so they can comply with their ISO 9001 quality management system. This demonstrates their ability to manage external suppliers in line with their legal business practices. 

With our supplier performance management solution, customers can utilise our existing insights to make data-informed decisions and see other main contractors’ ratings about how suppliers they want to work with have performed.  

You can also: 

• • Monitor and track subcontractor performance across your projects 
  • Centralise supplier data and ratings 
  • Create a supplier scorecard – determine KPIs by your chosen areas 
  • Send tailored questionnaires to your team to gather feedback 
  • Use it alongside our Risk Radar tool, and stay ahead of financial supply chain distress 

Learn more about how to use our Supplier Performance Management tool within your supply chain. 

Key takeaways 

• Use construction supplier performance management solutions to your advantage 
• Keep on top of your audits and ISO 9001 
• Get a head start on choosing which suppliers you want to add to your supply chain 
• See first-hand what other main contractors are rating suppliers you want to work with, with easy visualisation tools with our Supplier Performance Management solution 

You decide which metrics matter. 

Book a Demo to see Supplier Performance Management in action.