Ten Methods to Ensure Supplier Operational Performance Improvement Efforts Are Promoted by the Customer

Jim Bergman

In today’s competitive and interconnected supply chains, supplier performance isn’t just a vendor issue – it’s a customer responsibility. Leading organizations recognize that their suppliers’ operational excellence directly impacts their own outcomes. Whether it’s quality, cost, delivery, or innovation, supplier performance improvement must be actively promoted – not passively expected.

Structured methodologies like Lean Contracting and Supplier Six Sigma offer powerful tools for driving efficiency, reducing waste, and enhancing value. But these efforts only succeed when customers take the lead in fostering a culture of continuous improvement.

Let’s explore ten proven methods to ensure supplier operational performance improvement efforts are not only encouraged – but embedded into the customer-supplier relationship. Examples are drawn from more than a dozen industries including healthcare, construction, finance, education, logistics, energy, agriculture, hospitality, telecommunications, manufacturing, media, legal services, and the public sector.

1. Embed Continuous Improvement Language in Contracts

Improvement starts with intent – and intent begins with the contract. Customers should include clauses that explicitly promote operational excellence, such as commitments to Lean practices, Six Sigma participation, or regular process reviews.

Industry Examples:

  • Construction: Contracts include provisions for subcontractors to participate in Lean planning sessions and pull scheduling.
  • Healthcare: Supplier agreements require participation in quality improvement initiatives tied to patient outcomes.
  • Finance: Outsourcing contracts mandate quarterly process optimization reviews using Six Sigma tools.

Embedding improvement into the contract sets expectations from day one.

2. Use Performance-Based Incentives

Tie supplier rewards to operational performance metrics. Incentives can be financial (bonuses, rebates) or strategic (preferred supplier status, longer contracts). The key is to reward not just results – but the effort to improve.

Industry Examples:

  • Manufacturing: Suppliers receive bonuses for reducing defect rates through Six Sigma projects.
  • Education: Software vendors earn contract extensions for improving system uptime and user experience.
  • Logistics: Carriers gain preferred lanes for consistently improving delivery accuracy and reducing damage rates.

Incentives turn improvement into a shared goal.

3. Facilitate Supplier Training and Certification

Customers can sponsor or co-host training programs to build supplier capabilities in Lean, Six Sigma, and other operational disciplines. This may include workshops, certifications, or access to internal learning platforms.

Industry Examples:

  • Energy: Utilities offer Lean training to maintenance contractors to improve field efficiency.
  • Hospitality: Hotels provide service vendors with Six Sigma training to reduce guest complaints.
  • Agriculture: Co-ops host workshops on process mapping and waste reduction for input suppliers.

Training empowers suppliers to improve from within.

4. Co-Develop Improvement Projects

Rather than waiting for suppliers to initiate change, customers can co-develop improvement projects. These may target bottlenecks, quality issues, or cost inefficiencies. Joint teams work together using structured methodologies.

Industry Examples:

  • Telecommunications: Providers collaborate with hardware vendors to streamline installation workflows using Lean tools.
  • Media: Studios work with post-production teams to reduce turnaround time through Six Sigma DMAIC cycles.
  • Legal Services: Firms partner with document review vendors to improve accuracy and reduce rework.

Co-development builds trust and accelerates results.

5. Conduct Regular Operational Audits

Audits aren’t just for compliance – they’re for improvement. Customers should conduct structured operational audits focused on process efficiency, waste reduction, and continuous improvement efforts.

Industry Examples:

  • Healthcare: Hospitals audit supplier logistics to identify delays and propose Lean solutions.
  • Education: Universities audit software vendors’ support processes to improve ticket resolution times.
  • Construction: Developers audit subcontractor workflows to reduce idle time and improve coordination.

Audits uncover opportunities and reinforce accountability.

6. Create Supplier Improvement Forums

Establish regular forums – roundtables, summits, or working groups – where suppliers share improvement initiatives, lessons learned, and best practices. Customers facilitate and encourage cross-pollination of ideas.

Industry Examples:

  • Finance: Banks host quarterly supplier summits focused on operational excellence and digital transformation.
  • Public Sector: Agencies convene vendor roundtables to discuss Lean procurement and service delivery.
  • Retail: Chains organize supplier forums to share inventory optimization strategies.

Forums foster community and collective progress.

7. Share Internal Best Practices

Customers can accelerate supplier improvement by sharing their own operational excellence playbooks. This may include Lean templates, Six Sigma tools, or case studies from internal projects.

Industry Examples:

  • Manufacturing: OEMs share kaizen event structures and visual management tools with component suppliers.
  • Education: Institutions share ITIL-based service management practices with edtech vendors.
  • Logistics: Distributors share warehouse layout optimization techniques with third-party providers.

Knowledge sharing builds capability and alignment.

8. Require Improvement Reporting

Ask suppliers to report on their operational improvement efforts. This may include project summaries, KPIs, training participation, or process changes. Reporting should be structured and reviewed regularly.

Industry Examples:

  • Energy: Contractors submit quarterly Lean initiative reports with measurable outcomes.
  • Media: Vendors provide Six Sigma project updates tied to production efficiency.
  • Healthcare: Suppliers report on quality improvement efforts linked to clinical performance.

Reporting creates visibility and momentum.

9. Align Improvement with Strategic Goals

Operational improvement should support broader strategic objectives – sustainability, digital transformation, customer experience. Customers should help suppliers connect improvement efforts to these goals.

Industry Examples:

  • Agriculture: Input suppliers align Lean initiatives with sustainability targets like water conservation.
  • Telecommunications: Vendors align Six Sigma projects with network reliability and customer satisfaction.
  • Hospitality: Service providers align process improvements with brand standards and guest loyalty.

Strategic alignment ensures relevance and impact.

10. Recognize and Celebrate Success

Improvement deserves recognition. Customers should celebrate supplier achievements through awards, case studies, or public acknowledgment. This reinforces the value of operational excellence and motivates others.

Industry Examples:

  • Construction: Subcontractors are recognized for Lean innovation in project showcases.
  • Finance: Vendors are featured in internal newsletters for Six Sigma breakthroughs.
  • Education: Technology partners are honored for service improvements at annual procurement events.

Recognition turns improvement into culture.

Final Thoughts

Supplier operational performance improvement isn’t just a supplier responsibility – it’s a customer opportunity. By promoting structured methodologies like Lean Contracting and Supplier Six Sigma, organizations can elevate their entire supply ecosystem.

Across industries – from healthcare to hospitality, logistics to education – the principles remain consistent: embed improvement in contracts, reward effort, build capability, and celebrate progress. When customers lead the way, suppliers follow with confidence and commitment.

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Published by Jim Bergman

Jim Bergman is a commercial contract professional with global experience spanning the USA, Latin America, UK, Europe, China, South Korea, Japan, India, SE Asia, the Middle East, Africa and Australia. He has worked on a wide range of direct and indirect spend categories in numerous sectors, developing a deep knowledge of services, goods and technology procurement and sales. Across this wide array of commodity and services experience, Jim has found the keys to success in maximizing value for money through customer-supplier relationships founded on innovative category management and strategic sourcing practices, key performance metrics and measures, as well as Total Cost of Ownership principles and collaborative contracting tenets. He has shared his knowledge through advisory engagements, as well as in developing and delivering training programs both on-line and in classrooms, in both open-enrollment and internal environments. Jim has assisted his clients through all phases and steps of contracting, negotiation, strategic sourcing and bidding processes, demonstrating value generation in excess of $250 million. His audiences and clients have included over 7,000 attorneys and commercial professionals students from over 1,000 corporations and public-sector entities.

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