The Supplier Performance Index (SPI) establishes a uniform business wide supplier rating system where past supplier performance on quality and delivery are captured and quantified using an index technique. The SPI can be as a multiplier or bid factor and used to award future business based upon past performance (amount of non-productive costs accumulated by a supplier).

A statistical normalizing method is incorporated into the SPI formula to correct for the basis of large dollar suppliers. The concept is all waste is bad, $500 of non-productive costs  are undesireable whether they come from a supplier delivering in lots $100,000 or $10,000 or $1,000.