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
| KPI | Formula | Typical target |
|---|---|---|
| PPM (parts per million) | Rejected parts ÷ delivered parts × 1,000,000 | Below 50 for automotive series, by agreement |
| On-time delivery (OTD) | Deliveries on time and complete ÷ all deliveries × 100 % | ≥ 98 % |
| Number of complaints | Count of official complaints in the period | 0, trend matters |
| 8D response | Share of 8Ds meeting containment (24 h), root cause (10 days) and closure targets | 100 % |
| Cost of poor quality | Sorting, rework, scrap, freight and administration charged to the supplier | Trend 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.