Posted By Jeff Moad, January 03, 2012 at 3:57 PM, in Category: Sustainability
Today, most manufacturers attempting to monitor and shape the sustainability performance of their suppliers don't base their evaluations on specific KPIs or hard improvement targets. That's because, as a recent CAPS Research report notes, defining standard sustainability KPI and deciding where and how to apply them in the supply chain can be dauntingly complex. Should all suppliers be judged using the same KPI metrics, and should improvement targets be the same for all? If not what, for example, is the ideal carbon emission level for a given supplier and my how much should that supplier be expected to improve each year?
In lieu of such specific KPI metrics and improvement targets, many manufacturers today base their supplier evaluations on whether the supplier tracks things like carbon emissions and the extend to which the supplier is meeting it's own publicly-stated targets.Suppliers that are found wanting are often coached rather than replaced.
Over time, it's expected that standard sustainability KPIs will emerge for specific industries, allowing manufacturers to hold suppliers to specific performance improvement targets.
As sustainability performance KPIs become more standard and more serious, however, manufacturers will need to decide what their policies will be regarding suppliers that don't measure up? Will failure to meet specific KPI targets be grounds for supplier replacement? If so, could the costs involved in changing suppliers for sustainability performance reasons be justified?
How does your company measure the sustainability performance of its suppliers? Are you moving toward more standard and specific KPIs? What's your policy on dealing with suppliers whose sustainability performance falls short?
Written by Jeff Moad
Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit