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Supplier KPIs: PPM, on-time delivery and how to calculate them

The supplier performance indicators that matter: PPM, on-time delivery (OTD), complaints, response time and cost of poor quality, with formulas, typical targets and how to combine them into a scorecard.

Keep it to a few hard numbers

A good supplier scorecard has four to six indicators that are measured the same way every month and that the supplier can influence. More indicators make the score harder to understand and easier to argue about.

Formulas

KPIFormulaTypical target
PPM (parts per million)Rejected parts ÷ delivered parts × 1,000,000Below 50 for automotive series, by agreement
On-time delivery (OTD)Deliveries on time and complete ÷ all deliveries × 100 %≥ 98 %
Number of complaintsCount of official complaints in the period0, trend matters
8D responseShare of 8Ds meeting containment (24 h), root cause (10 days) and closure targets100 %
Cost of poor qualitySorting, rework, scrap, freight and administration charged to the supplierTrend down

Definitions to agree in advance

  • Which rejects count: only confirmed supplier responsibility, or every rejected part.
  • Delivered quantity: in the same period, by goods receipt date.
  • On time: the window (for example −2 / +0 days) and whether partial deliveries count.
  • When a complaint is official and when it is just information.

From KPIs to a class

Turn each KPI into points (for example 0–100 against targets), weight them (quality usually 50–60 %), and add them up. Classes such as A (≥ 85), B (70–84) and C (< 70) then drive the reaction: no action, improvement plan or escalation. Share the result monthly with the supplier and track the trend over 6–12 months, not only the last month.

Written by Ľubomír Blažek, automotive quality manager. Standards are summarised in our own words; use the official publications for formal work.