Supplier Scorecard has become a very popular supplier performance management tool. Most companies use them to some degree, and others would like to implement them as an integrated part of their business.
While supplier scorecard is popular in many organisations and businesses, the result of using them varies a lot. If the implementation of supplier scorecard is not properly thought through from the beginning, their ability to drive continuous improvement at suppliers are limited.
Supplier Scorecard Mistakes to Avoid
Below are some of the mistakes that should be avoided when implementing supplier scorecards as part of your supplier management system.
- Measure what is important to the business, not what is easy to measure.
- Do not copy/paste KPI’s from another company; the scorecard should contain what is needed for each individual business.
- Do not develop the scorecard without taking the objectives of your business into account.
- Not sharing the scorecards with the suppliers on a regular basis, would result in limited to no improvement from suppliers.
- Do not create a huge list of items you want to measure, or use scorecards on too many suppliers. Pick your key suppliers and performance indicators.
- Missing commitment from stakeholders to provide data within the required timeframe, would compromise even the best laid plans for monitoring and evaluating your suppliers.
- If you are not open with the supplier about what is measured, how it is measured and what is expected from them, the scorecards will not drive any improvements.
- If there is no reward or consequences for the supplier to be at the top or bottom of your ranking, no actions will be taken or improvements seen.
Supplier Scorecard Categories
The supplier scorecard contains different categories in which the supplier is measured. These typically consist of quality, delivery, response time and cost, with quality as the biggest factor, contributing to around 40-60% of the overall supplier score.
Each of the four main categories, have some underlying subcategories being measured.
Building the Supplier Scorecard
Building an effective scorecard for your suppliers can be split up in a few elements as seen below.
- What is Important: What does the ideal supplier look like, while that often end up with unrealistic demands, it gives a good indication of what is important for your business. For example, use brainstorming with stakeholders to define what has the biggest impact on your business.
- Build Matrix: When the main categories are defined, it’s time to build the scorecard matrix with all the underlying elements. For example PPM or raised 8D reports for the supplier. A good scorecard clearly defines what is measured, how it is measured, and what good, acceptable and low performance is.
- Weight on Importance: When all the measurements are defined, it is time to weigh them based on importance. For example quality count for 60% of the overall score, and PPM for 30% of the quality score.
- Supplier Rating: Based on the above scoring system, the supplier rating related to each score should be defined. For example A, B and C suppliers, where every supplier below A need to have improvement actions in place, and C rated suppliers can’t quote for business.
- Program Rollout: In order for the supplier scorecards to get traction from the beginning, and not end up as flavour of the month, the rollout need to be properly executed. Create a proper presentation of the program so that each supplier clearly understand each score, how it is weighed, reason for implementing supplier scorecards etc.
It is important to get suppliers feedback on the program as well, this will also make the roll out much more smooth. Also a trial run the first month could be used to iron out any initial issues, in case something comes up.
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