Driving Value Beyond the Contract
Performance management is not just about monitoring - it's about driving improvement.
Continuous Improvement Techniques
- Joint Improvement Workshops: Kaizen/lean events focused on specific pain points (lead time reduction, defect elimination, process simplification).
- Benchmarking: Share anonymized industry benchmarks with the supplier to set stretch targets.
- Gainsharing: Agree that savings from supplier-initiated improvements are shared (e.g., 50/50). This creates a financial incentive for innovation.
- Supplier Development Programs: For strategic suppliers with capability gaps, invest in training, process improvement support, or technology transfer.
- Annual Strategic Review: Beyond QBRs, hold an annual strategic session with leadership participation.
When Performance Fails - Structured Escalation
Escalation Ladder
- Operational Escalation: Procurement manager to supplier account manager. Document issues, establish a corrective action plan.
- Management Escalation: Procurement director to supplier VP/GM. Formal performance improvement plan with 60-90 day deadline.
- Executive Escalation: CPO to supplier CEO. Final warning with clear consequences in writing.
- Contractual Remedies: Invoke penalty clauses, withhold payments, exercise audit rights.
- Exit: Terminate per contract provisions. Activate transition plan. Protect supply continuity.
💡 Exit Planning: Always have an exit strategy ready BEFORE you need it. During the sourcing event, identify backup suppliers and understand switching costs. A buyer who cannot credibly threaten to leave has no leverage.
🎯 Put it into practice: the "Sourcing Masterclass" simulator hands you a EUR 12M category — Pareto, Kraljic, savings estimation, 40 minutes. The ideal application ground after your final quiz.