5 Core Performance Criteria Every Scorecard Should Include
Scorecards offer an objective lens for assessing performance by allowing you to:
- Identify the performance criteria most important to your organization
- Share expectations with your suppliers
- Evaluate suppliers on their ability to consistently deliver value
Although there’s no one right way to build a scorecard, consider these five core criteria that every scorecard should include:
- Level of service: Many contracts include service-level agreements (SLAs). You can use the scorecard to measure your supplier’s performance against these SLAs. How well did your supplier meet pre-established service levels in areas like quality, delivery, and support?
- Cost control: Evaluate your suppliers on how well they help you manage costs in two areas. First, does the supplier hold to the pricing you both agreed to in the contract? Secondly, does the supplier offer you new ideas on reducing costs moving forward through alternative products, better use of technology, or improved inventory management?
- Ease of doing business: How efficient are your suppliers in their processes and systems? Those who are difficult to work with cost your business time and money. Talk to the stakeholders who use that product or service or interact with the supplier the most. Build their feedback into your scoring.
- Regulatory compliance: You probably rely on suppliers to meet an increasing number of third-party compliance mandates. Ask suppliers to track and report on their compliance with these requirements; be sure to include these in your scorecard.
- Innovation: Your most strategic suppliers should regularly bring you new ideas for improving business operations. Include these criteria on your scorecard, focusing on process rather than quantity.
Here’s one example of a supplier scorecard:
To get the most from your supplier scorecards, keep these three things in mind:
- Make it simple: Don’t use more than one or two measures per criterion.
- Focus on key suppliers: Focus on your top 15-20 critical suppliers.
- Create a consistent process: Integrate the scorecard into a regular review process to track performance over time and make better data-driven decisions.
Outstanding Performance? Carry On!
Good performance leads to ongoing collaboration and innovation. You can continue building on the partnership when things are going well. Businesses are more willing to cooperate when contract negotiations come around, especially for suppliers who are performing well on scorecards compared to others.
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