On what basis should supplier performance be compared?

The most effective basis for comparing supplier performance is the impact on total cost. This approach allows organizations to evaluate suppliers not only on their pricing but also on the overall economic implications of working with them. Total cost includes various factors beyond just the purchase price, such as transportation costs, inventory costs, and potential costs related to quality issues or delays.

By assessing the total cost of a supplier, businesses can identify the supplier that offers the best value. This perspective encourages a holistic view of the supply chain, where decisions are made based on the cumulative costs associated with sourcing a product or service over its entire lifecycle.

While other factors, such as impact on delivery schedules, price, and product quality, are also important in evaluating suppliers, they should be considered in the context of total cost. For instance, a supplier who offers lower prices but has inconsistent quality or reliability may lead to higher costs in the long run due to returns, rework, or delays. Thus, focusing on total cost helps ensure that all relevant factors affecting the supply chain's efficiency and profitability are taken into account.