Whatever sort of incentives you end up putting in place here are golden rules:

1. Make sure you have a Supplier Performance Management System in place first.
Preferably one that reports progress quarterly. Suppliers will see themselves getting
closer to the bar / next tier each quarter.
2. Make sure you have done a cost benefit analysis for your Incentive initiative.
Likewise make sure you have a budget agreed to support the initiative for the years
ahead.
3. Make sure that you give the incentive program the support / continuity it needs. The
worst thing would be to roll out an initiative and kill it again a year later. Suppliers
working hard to hit the KPI targets and get the incentives, may not get there in the first
year, but rest assured they will be working harder and harder each quarter to get there.
4. Encourage and promote competition among suppliers by promoting the initiative
as this will drive up performance.
5. If your incentives are financial promote that also in your supplier charter.