Measuring supplier reliability
An unreliable supplier is paid for in the stock you carry to cover them, which never appears on their invoice.
Suppliers are compared on price. The cost of unreliability is real, substantial, and almost never quantified — which means the cheaper, less reliable supplier usually wins the comparison.
Many stock problems are cheaper to prevent than to fix after the fact. For a broader workplace example of acting before problems become urgent, see this overview.
Four numbers per supplier
- On-time delivery rate: what proportion arrived by the promised date.
- Fill rate: what proportion of ordered quantity actually arrived, first time.
- Lead time spread: not just the average, but the worst case over the last year.
- Quality rejections and damage on arrival, as a proportion of lines received.
These come from the receiving records, which means the receiving process has to capture what was promised as well as what arrived. Without that, none of it can be measured.
A delivery that arrives on time with two of five lines short is not an on-time delivery in any sense that matters to the shelf.
Price the unreliability
A supplier whose lead time varies by two weeks requires two weeks of extra safety stock on every line you buy from them. That stock has a value, and it is a permanent cost of using them.
Comparing suppliers on unit price alone ignores this entirely. Adding the carrying cost of the safety stock their variability requires frequently reverses the ranking.
For broader small-business operating guidance, the U.S. Small Business Administration publishes public resources on managing day-to-day business processes.
Tell them
Most suppliers do not know their performance against a specific account, because they see their own averages rather than yours.
A quarterly summary — orders placed, on-time percentage, fill rate, worst case — sent politely and factually, changes behaviour surprisingly often. It also establishes a record if the relationship later needs to end.
Have a second source for what matters
Single-sourcing a critical line concentrates risk that no amount of safety stock fully covers. For lines where a stockout is expensive, knowing an alternative supplier — and having ordered from them at least once — is cheap insurance.
The once matters. An untested alternative is a phone number, not a supply route.
Review the whole list annually
Supplier lists accumulate: firms used once, firms whose terms have drifted, firms that were acquired. An annual pass over who you buy from, how much, on what terms and how reliably they perform is usually the first time anyone has seen the picture whole.