When you sign a contract with a vendor you are expecting a specific outcome or service to be delivered; that outcome or service will need metrics to ensure that it is being delivered to the standard that you expect.
Metrics are included in the contract to measure success. You negotiate these metrics into the agreement as service level agreement or key performance indicators.
In Jimmy Desai’s book Service Level Agreements (reference provided below) he gives two reasons you would use such measurements; 1) to influence supplier behaviour; and 2) defining the services and the standard required of the vendor.
Creating these metrics when you negotiate the contract can be a best guess at a point in time. It is difficult to know what will be important during the life span of the contract.
As a vendor manager you will need to ensure that you operationalise the service level agreements and key performance indicators in the contracts that you manage. This will show you whether your vendor is performing to the required SLAs and whether you need to escalate issues.
You should also consider whether the SLAs and KPI are still important to your company and whether some changes are required.
Measuring these metrics will need an agreed upon method. These will be agreed between the vendor and the customer.
Performance management, in my view, goes much further than SLA measurement it also extends into relationship management and vendors display of values and being a strategic partner.
My next article: what is an SLA and a KPI?
Service Level Agreements A legal and practical guide Jimmy Desai IT Governance Publishing 2010
https://www.amazon.com/s/ref=nb_sb_ss_c_1_24?url=search-alias%3Daps&field-keywords=service+level+agreements&sprefix=service+level+agreements%2Caps%2C393&crid=LLHXXCXPCE68