5 Performance Criteria Every Supplier Scorecard Should Include (and How They Fuel Supplier Performance Management)
Choosing the right suppliers can be tricky. Are they reliable? Cost-effective? Do they deliver quality goods and services? Just asking these questions isn’t enough in today’s global marketplace.
Your procurement team needs data-driven insights to stay competitive and effectively manage your supplier partnerships. That’s where supplier scorecards come in. These real-time report cards shine a light on cold, hard facts rather than relying on guesswork or gut feelings.
What Is a Supplier Scorecard?
A well-constructed supplier scorecard is an indispensable tool for continuous improvement of your supplier relationship management strategies. Think of it as your supplier performance dashboard that paints a clear picture of who’s truly delivering. An effective scorecard captures key performance indicators (KPIs) like:
- On-time delivery: Are they consistently on schedule?
- Quality: Do their products or services meet your standards?
- Cost: Are they within budget?
- Customer service: How responsive and helpful are they?
Measure & Monitor Supplier Performance with Scorecards
Scorecards offer an objective lens for tracking and improving supplier performance over time. For example, this data collection and analysis allows you to identify:
- Top performers: Who consistently delivers superior results?
- Areas for improvement: Where can suppliers adjust to better meet your needs?
- Potential risks: Are there any red flags requiring corrective actions?
Key Metrics to Include in Your Supplier Performance Scorecard
Although there’s no one right way to build a scorecard, here are five core performance metrics that every scorecard should include to drive continuous improvement:
Level of Service Quality
Many contracts include service-level agreements (SLAs). You can use the scorecard to monitor supplier performance against these SLAs. How well did your supplier meet pre-established service levels in areas like quality, delivery, and support?
Cost Control
Evaluate how well your suppliers 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 how to cut costs, better use technology, or improve inventory management?
Ease of Business Processes
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 those products and services or interact with that 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. Include these in your scorecard.
With third-party data validations and automated risk assessments and remediation plans built right into the Graphite platform, we can help you simplify risk management so your supply chain stays on track and moving smoothly.
Innovation
Your most strategic suppliers should regularly bring you new ideas for improving your organization’s operational performance. Include these criteria on your scorecard, focusing on process rather than quantity.
Example of a Supplier Scorecard
Here’s one example of a supplier scorecard from Smartsheet:
| Supplier Scorecard | [Date] | |||||
| Supplier Name: | Overall Rating: | 3.17 | ||||
| Buying Category | ||||||
| Buyer Name | ||||||
| Area | Scorecard Criteria | Rating Scale for Expectations 1= Below, 3 = Meets, 5 = Exceeds |
Comments | Area Weight |
Area Rating |
Wtd. Rating |
| Innovation | Management commitment and responsiveness | 5 | add comments here | 25% | 3.67 | 0.92 |
| Application of creative ideas, best practices and technology that results in encreased effectivenes for Buyer | Appropriate technical capabilities and skills | 4 | add comments here | |||
| Provides ideas that help Buyer’s organization achieve desired solutions | 2 | add comments here | ||||
| Quality | Demonstrated compliance with specifications and quality requirements | 3 | add comments here | 20% | 3.00 | 0.60 |
| The compliance to Buyer’s specifications and industry standards | Committed to process performance and continuous improvement | 3 | add comments here | |||
| Maintains industry standard certifications for testing and audits | 3 | add comments here | ||||
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 supplier scorecard into a regular review process to track and measure supplier performance over time and make better data-driven decisions.
Take Action with Supplier Performance Management
Supplier scorecards are your launchpad for proactive supplier performance management (SPM). Scorecards are about measuring and monitoring supplier performance, while supplier performance management is about using the data gleaned from these scorecards to actively manage those partnerships.
Actions might include:
- Engaging with underperforming suppliers: Provide feedback and support to improve supplier performance.
- Renegotiating contracts: Use your data to negotiate better terms with strong performers.
- Developing supplier partnerships: Collaborate with preferred suppliers to improve processes.
Supplier performance management goes beyond simply monitoring to building strategic, mutually-beneficial partnerships with your suppliers. By combining the data collected from your scorecards with proactive relationship management, you can:
- Reduce costs: Through better sourcing and improved supplier performance.
- Improve quality: By working with reliable suppliers who meet your standards.
- Increase efficiency: By streamlining processes and communication.
- Boost innovation: By collaborating with vendors to develop new solutions.
Supplier scorecards offer essential performance data, while supplier performance management takes action. Effectively combining the two can result in reduced costs, improved quality, and greater efficiency.
Outstanding Supplier Performance? Carry On!
Effective supplier performance management leads to ongoing collaboration and innovation. You can continue building on the partnership when your supplier relationships are going well.
Graphite can help your team track supplier performance based on the criteria that matter most to you and identify those suppliers that simply aren’t a good fit.
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