3 supplier performance metrics to increase returns

In wholesale and distribution, supplier performance has a direct impact on what matters most: stock availability, customer service levels, and margin. When suppliers miss delivery windows, short ship orders, or send inaccurate invoices, it doesn’t just create operational headaches — it creates real cost across freight, labor, working capital, and lost sales.

That’s why more procurement and supply chain teams are using inventory optimisation tools to track supplier performance metrics consistently, spot issues early, and negotiate from a position of clarity. This is a critical part of supplier performance management (SPM) and supports stronger supplier relationship management across the lifecycle of a supplier.

With fact-based reporting, procurement teams can measure the performance of suppliers over time, compare suppliers across categories and locations, and quickly identify where performance gaps are affecting service and profitability. Better still, analytics tailored for wholesalers and distributors helps uncover inefficiencies and deliver measurable cost savings.

Analyze supplier performance metrics with confidence

Supplier performance is rarely “good” or “bad” across the board — it varies by product line, warehouse, order type, region, and time period. That’s why relying on spreadsheets or anecdotal feedback can lead to the wrong conclusions.

With automated inventory optimization reporting and structured data collection, you can track the key performance indicators that matter most, including:

• on-time delivery rate

• defect rate

• quality metrics

• pricing and margin movement

• claims, returns, and invoice accuracy

• supplier performance trends over time

These key supplier KPIs and metrics act as both a warning system and a roadmap for continuous improvement — helping you evaluate supplier performance consistently and align decisions with benchmarks and agreed quality standards.

Here are three essential supplier performance metrics to get you started

1) Delivery performance (OTIF/DIFOT + lead time reliability)

For wholesalers and distributors, delivery performance isn’t just a supplier KPI — it’s the foundation of customer satisfaction.

The most common (and useful) delivery performance metric is DIFOT (Delivered In Full, On Time) or OTIF (On Time In Full). It answers two critical questions:

• Did the supplier deliver when they promised?

• Did they deliver the full quantity ordered?

A supplier who delivers on time but short ships creates backorders, split deliveries, and additional freight costs. A supplier who delivers in full but late increases the risk of stockouts — and pushes your team into reactive expediting.

To make delivery performance truly actionable, wholesalers and distributors should track:

• on-time delivery rate: delivery against the promised date

• lead time accuracy and variability

• order accuracy (right items, right quantities)

This is where supply chain management and the procurement process intersect — because delivery reliability impacts service, planning, inventory holding, and working capital.

When you can measure delivery performance at a detailed level — by warehouse, category, or supplier site — you can quickly identify late deliveries, pinpoint underperforming suppliers, and act before service levels decline.

2) Product quality performance (defects, returns, compliance)

Even when suppliers deliver on time, product quality issues can quietly erode profit and damage customer trust.

That’s why wholesalers and distributors should monitor product quality metrics such as:

• defect rate

• damaged goods rate

• returns frequency

• claims value

• compliance to quality standards

For effective supplier management, it’s important to tie quality performance to real business outcomes — because quality issues don’t just create admin work, they reduce service levels and impact customer satisfaction.

Where quality issues occur, inventory reporting supports faster corrective action by identifying:

• the specific supplier, product, or warehouse driving issues

• recurring defects over time

• trends that indicate declining supplier performance

3) Cost and margin impact (price variance + total cost to serve)

Price is important — but unit price is only one piece of supplier performance. For wholesalers and distributors, the real goal is sourcing that’s cost-effective and protects margin long-term.

inventory reporting makes it easy to compare:

• current vs historical pricing

• price increases and cost inflation trends

• price variance across similar SKUs

• margin impact by supplier and category

But the biggest improvement often comes from understanding total cost of ownership — because supplier performance issues show up as hidden costs, including:

• split deliveries and extra freight

• labor handling multiple deliveries

• expediting and emergency buying

• increased inventory buffers due to unreliable supply

• lost sales and reduced service levels

By linking supplier pricing to operational impact, procurement can identify suppliers who look competitive on paper but create cost in practice. This improves sourcing decisions and supports better supplier negotiations and cost savings.

Improve supplier risk management with real-time dashboards

Supplier performance management isn’t just about cost and delivery — it’s also about risk management.

Inventory reporting helps teams identify supplier risk, uncover potential risks, and respond faster when supplier performance starts to decline. This includes risks such as:

• repeated late deliveries

• quality issues and compliance failures

• sudden cost increases

• unreliable lead times impacting service levels

This visibility enables faster intervention, stronger supplier accountability, and more resilient supply chain management.

Make supplier performance metrics actionable with Phocas

With Phocas, wholesalers and distributors can evaluate supplier performance in real time and in just a few clicks — without relying on manual spreadsheets.

Phocas supports supplier performance management (SPM) by enabling:

• reliable data collection

• tracking supplier key performance indicators

• supplier performance evaluation over any time period

• identifying underperforming suppliers quickly

• enabling consistent performance reviews and stronger partnerships

• supporting proactive corrective action

• improving the procurement process end-to-end

With this visibility, teams can reduce inefficiencies, improve service outcomes, and build a stronger base of effective supplier relationships that protect margin and support long-term growth.