Supplier Performance Index (SPI) is a score that measures a supplier’s overall performance by evaluating key factors like cost, quality, delivery, and service against expectations or contract terms.

What it Measures ?

How well a supplier performs in terms of quality, timing, and support.

Relevant StakeHolders 

Supplier Relationship Managers, Quality Teams

In-depth Use Case / Real-world Example

Consider a manufacturing company that assembles agricultural machinery. It relies on multiple suppliers for components like gears, hydraulic parts, fasteners, and control panels. Each supplier plays a critical role in ensuring smooth production and timely deliveries. But not all suppliers perform the same. Some deliver late, some have higher defect rates, and others may change prices frequently. To keep operations efficient and predictable, the company needs a way to measure how well each supplier is performing. That’s where the Supplier Performance Index comes in. SPI is a composite score that takes into account various performance metrics—such as on-time delivery rate, defect rate, responsiveness, pricing consistency, and support quality. Each factor is weighted based on its importance to the business. The goal is to create a single number that reflects how reliable and valuable the supplier is. For example, a supplier that consistently delivers parts on time, with fewer than 1% defects, fair pricing, and quick resolution of issues will have a high SPI—close to 1.0 or 100%, depending on the scale. On the other hand, a supplier with frequent delays, quality issues, or poor service will have a lower SPI. By tracking this index, the company can make informed decisions—such as continuing contracts with high-performing suppliers, renegotiating terms with average ones, or phasing out low-performing vendors. It also helps build stronger partnerships by identifying areas for improvement and collaboration. SPI turns supplier evaluation into a data-driven, transparent process that supports better procurement and smoother manufacturing operations.