Development of performance measurement system in managing supplier relationship for maintenance logistics providers

Purpose – To develop a performance measurement system (PMS) in the application of supplier relationship management operated under a supply chain benchmarking framework. Acting as a monitoring tool for evaluating the performance of maintenance logistics providers against the defined performance levels stated in the contract, and facilitating the application of benchmarking approach in maintenance logistics activities. Design/methodology/approach – A six tiers collaborative management model is designed in building the PMS, by which information sharing of performance history of suppliers is made possible. By following the work flow of the PMS, performance of suppliers is benchmarked with the best‐in‐class supplier, resulting in the identification of the most appropriate supplier for the particular requirement. Findings – PMS helps a company and its suppliers to understand the performance gap between its service levels with the best‐in‐class practice. The resulting performance gap provides valuable information in the formulating of a new supply chain and strategic plan in solving problems and challenges in aviation industry. By means of PMS, a company can make decisions with the basis of a good relationship with its business partners, especially in the maintenance logistics area. Research limitations/implications – The design of PMS must take into consideration of the data sources, the duration of taking the required data, and the focal point on collecting information. Moreover, findings from the study have to be revised every two years. Originality/value – By applying PMS in one of the leading airlines in Hong Kong, suppliers' deficiencies in the logistics performance are identified easily. Moreover, current operational service level is effectively enhanced and the combination of the best‐in‐class supplier service package is accurately selected.