The search term “penalize your supplier” in a Google search recently led someone to my web site, www.StrategicAdvisor.ca
They landed on our performance measurement article, which certainly has those words in the content, but then they quickly went somewhere else – probably because we don’t talk about penalizing suppliers – we focus on managing supplier performance to get results in a proactive, constructive way.
Unfortunately, the idea of punishing suppliers to get better behaviour is an old fashioned approach that still lingers. I certainly agree that if services are not performed as expected, KPI’s should kick in and may result in a deduction, but as part of a performance management process, not as a ‘penalty’. If they truly aren’t performing and their bad behaviour continues after proactive and constructive measures, including good communications, you need to exercise your termination clause and move forward.
However, before you procure someone else, carefully consider why they didn’t perform. Is it the spec, a price lower than market, unrealistic expectations, conditions they didn’t forsee, issues caused by your own operations, etc.
Unless you assess these issues and correct them, you will only repeat the cycle.
