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The procurement department of Sanofi’s Greek subsidiary is responsible for buying products and services associated with all activities and functions of the organisation, including human resources, information systems, facilities, distribution, marketing, communication, medical and capital expenditure. In this context, the evaluation of new and existing suppliers is an integral part of the procurement function’s ongoing activities. The objectives of performance assessment include: · Monitor the progress of qualified suppliers. · Receive feedback from internal customers about the quality of products and services delivered.
assessment process ensures that we have both an objective snapshot of the supplier’s capabilities and a continuous assessment of the supplier’s delivered products and services over time. How does Sanofi measure supplier performance? What elements of performance are measured and how are users involved in the assessment process? For the largest spend categories, the performance of suppliers are measured on a project by project basis. Assessment includes both qualitative and financial metrics and is undertaken by the end user and the relevant buyer. Additionally, we conduct an ABC analysis annually to determine which suppliers will be assessed each year. The supplier performance metrics are categorised in four groups:
· Identify new suppliers with the right capabilities, financial health, quality and competitive pricing.
· Financial indicators. · Contract negotiations. · Delivery of the products or services.
Why is Supplier Performance Management important for Sanofi? Supplier performance is not static. Both internal factors (e.g. changes in strategy, needs, systems, technology) and external factors (e.g. market conditions, competition) affect the suppliers’ responsiveness, as well as the quality of their products and services. The initial qualification of a supplier via a Request for Proposal (RFP) process should only be considered the start. During this phase we ensure that we select the supplier that best meets the requirements of our organisation at the best possible price. We collect information about the supplier’s experience in the specified field, the financial position and the competitiveness of the supplier within the market. However, working with a supplier will eventually validate the results of the initial assessment of the supplier. At this stage, the quality of the supplier’s performance is assessed by both the end user and the relevant buyer within the organisation. Additionally, close monitoring of various risk indicators mitigates the likelihood of surprises in relation to the supplier’s financial health and gives us an ability to respond quickly should the need to change suppliers become necessary. What impact, if any, has the economic downturn had on suppliers’ performance? Why do you think performance management is an essential element of supplier management? The economic crisis affects suppliers’ performance in multiple ways. The effect of a reduction in human resources, especially for the service providers, has been immediately noticeable, as the response time has increased, the provision of products and services has been standardised and there is no opportunity for customised solutions. However, there are cases in which the impact of the crisis has become a motivating factor for the suppliers and has had the exact opposite effect: there are suppliers that are aiming for a bigger share of the market’s shrinking demand by offering additional services, for example, or targeting niche requirements that few companies have the expertise to compete for. Whichever suppliers we work with, our structured performance
· Supplier initiatives in relation to the environment, health and safety, ISO accreditations, and technology infrastructure. If the average score of a supplier across these four groups (calculated from the detailed scores in each of these groups) is less than “Good”, the replacement of the supplier is recommended. How are the results of the performance assessment discussed with suppliers? How are improvement plans put in place as a result of the performance assessment? In the event that the score of a supplier in a specific group of performance metrics is low, the supplier is informed by email by the relevant buyer and is encouraged to improve its performance in this area. Theoretically, we provide suppliers with the opportunity to improve their performance until the next performance assessment in the following year. However, if the supplier’s performance deteriorates further, we will take ad hoc actions (e.g. schedule meetings with the supplier’s management team, agree timelines for corrective actions, and initiate ongoing monitoring). If these initiatives are not successful, then we would look to replace the supplier. What are the benefits (financial and non-financial) of assessing suppliers’ performance? Suppliers are assessed during the RFP process and, subsequently, during project implementation. The benefits of supplier performance assessment are seen, firstly, in internal customer satisfaction – in other words, whether the end users (internal customers of the procurement department) are satisfied with a particular product or service. Essentially, this shows that we manage to purchase the right quality of products and services at the best possible market prices. Additionally, supplier performance management has enabled the company to secure significant cost savings of about 6% last year, and to prevent supply disruption by maintaining alternative suppliers, where needed.
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