example of supplier scorecards

Supplier Scorecards: What They Are and Why You Need Them

Supplier scorecards are an important part of supplier relationship management. They let you keep track of how your suppliers are doing and see where they need to improve. This information is very important for keeping good relationships with your suppliers and making sure that your business gets the best products and services possible. In this blog post, we will discuss what supplier scorecards are and why you should be using them!

Bridging the Buyer-User Divide

Ask most strategic sourcing professionals about how they are dedicating their time and resources, and you’ll likely receive the same answer: “Searching for possible strategic suppliers and including them in procurement processes like RFPs.” Here’s a question that isn’t asked often enough: “What is your current supplier base status?” In other words, “what’s up with your vendors?”

Surprisingly, many may not have an answer. They find potential vendors and pass them off to stakeholders who will actually be using the product or service. Take, for example, an individual searching for a CRM platform for their organization’s sales team. They might run an extensive vetting process, collect stakeholder input, and make the best decision possible. However, once that is over they usually must move onto another task; the vendor relationship gets switched off to someone else in charge of sales operations. Eventually when the contract expires, it can be easily discovered that the sales team has been unhappy with this CRM solution this whole time.

This issue demonstrates a major problem – the wide gap between those responsible for purchasing goods and services and those who are using them. It makes sense! Every department should focus on their appropriate job duties. But neglecting relationships with so many suppliers will cause issues. Fortunately there is a solution: supplier performance scorecards. These enable companies to track exact data about their suppliers which can be used when making future decisions about engagement with these partners.

What are Supplier Scorecards

A supplier scorecard is a tool that buyers use to measure how well their suppliers perform. It uses both quantitative and qualitative data from ERPs, accounting software, and surveys filled out by stakeholders who work with vendors often. The data is then aggregated to provide a score that can be used to track how different vendors measure up against each other over time.

The scorecard gives a comprehensive view of how each supplier is doing and can be used to identify areas where problems are occurring. It’s also useful for figuring out who the best suppliers are, so that management can prioritize them in the future. This process helps companies keep good relationships with their vendors and avoid making expensive mistakes because their vendors didn’t do a good job.

The Key to a Strong Scorecarding Program

Data collection is the key to a strong scorecarding program.

Quantitative data should come through an automated data feed. This maximizes automation and minimizes manual effort. It also ensures that no one is inadvertently putting their thumb on the scale with human pre-processing.

Qualitative data is often where the rubber meets the road. This is where you actually want people to put their thumbs on the scale. Surveys provide this data. The best practice for building a survey is a big topic on its own, but the premise is simple: you create a list of questions that can be used to assess the vendor’s performance. One typically groups these questions into sections – think “Customer Service,” “Product Quality,” etc.

Surveys go out to stakeholders to evaluate vendor performance. Those results combined with the quantitative assessment provide the total score. With regular evaluation of suppliers’ scores over time, buyers can make informed decisions on who they choose to do business with, and how much.

The Benefits of Supplier Scorecards

Scorecards provide buyers with a transparent, consistent, and comprehensive view of their suppliers’ performance. This enables them to make better decisions when it comes to vendor selection. Better vendor selection can have a huge impact on the company’s bottom line. By monitoring the performance of each supplier in detail, buyers can spot potential problems before they occur. They can also identify areas where changing suppliers could lead to savings or better performance.

A consistent scorecard program also keeps people from making hasty decisions because of specific events. Is a single major incident the final straw, or a blip in an otherwise strong relationship? Without a history of supplier performance assessments, you can’t put specific incidents into the appropriate context, making it difficult to know if a drastic response is warranted or an overreaction.

Scorecards also help build better relationships with vendors by making it easier for both parties to talk to each other. It ensures that vendors are accountable for their performance. It also provides a more straightforward incentive to maintain high levels of quality and service.

Getting Started with Supplier Scorecards

Supplier scorecards provide buyers with an invaluable resource for managing their supplier relationships. They can judge how well a vendor is doing, find problems before they happen, and help the two parties talk to each other better. When used properly, supplier scorecards are an efficient way to manage suppliers and keep a handle on costs over time.

Want to make things easier on yourself and better for your organization? Set up a supplier performance scorecard and put the data to work.

(And if you’re interested in taking a deeper dive, we invite you to check out Vendorful’s Essential Guide to Vendor / Supplier Scorecards.)

supplier diversity

Supplier Diversity: The 5 Critical KPIs

The benefits of supplier diversity are well-documented and widely known. From improved brand reputation and customer loyalty to top-line growth and bottom-line savings, businesses that embrace supplier diversity reap rewards on many fronts.

Yet, while the advantages of implementing a program are clear, actually measuring the success of such initiative can be less straightforward. In this blog post, we’ll look at five key performance indicators (KPIs) that can help you gauge the effectiveness of your supplier diversity program. By monitoring these KPIs, you can ensure that your program is delivering desired results and making a positive impact on your business.

The benefits of supplier diversity

Supplier diversity is an invaluable initiative which brings many benefits to organizations. Studies show that by diversifying the supply chain, organizations are able to reduce their costs, gain access to more specialized services and products, and actively promote social justice through increased equity among suppliers. Supplier diversity is also beneficial for cultivating business relationships with wider networks of potential buyers that would otherwise be unavailable.

On a larger scale, incorporating supplier diversity into an organization’s operations has been proven to strengthen economic participation across communities. Overall, it’s a smart move for any organization looking to thrive in today’s global economy.

Why your supplier diversity program needs KPIs

Setting clear Key Performance indicators (KPIs) is an important part of supplier relationship management (SRM). KPIs provide focus, measure internal and external performance relative to your objectives, and as such are absolutely critical for assessing the effectiveness of your practices.

With the right KPIs, you can make sure your supplier relationships are effectively managed according to your values and standards. It’s great for transparency and it sets a strong foundation for long term supplier relationships. Therefore, ensuring you select the right KPIs for supplier relationship management should be a priority for any organization looking to maximize the impact of a supplier diversity program.

Critical KPIs for a successful supplier diversity program

An ideal KPI will measure the success of initiatives within an organization, provides a clear assessment of current state, and identifies areas for improvement. In our experience working with customers, the five most impactful KPIs for measuring the success of your supplier diversity program are:

  • % of spend with diverse suppliers: Self-explanatory and perhaps obvious, but most organizations struggle to answer the basic question “how much are we spending with diverse suppliers today?”
  • % of RFX that include N diverse suppliers: Typically N will be 1-2, and will often vary by category
  • Number diverse suppliers onboarded per month/quarter/year: An important part of driving more spend to diverse suppliers is building a larger set of diverse suppliers to buy from
  • Savings allocatable to diverse suppliers: Don’t make the mistake of assuming you won’t be able to measure a direct bottom-line impact from your diversity program!
  • Internal stakeholder satisfaction: An important measure in general, and a good way of measuring how your organization thinks the supplier diversity program is going

Through tracking these KPIs, organizations can identify where there are gaps related to supplier diversity and areas for improvement. Ultimately, this provides a clear picture of how well the organization is doing in achieving its supplier diversity goals.

How to measure your KPIs

Once you’ve you’ve defined a set of KPIs for your supplier diversity and broader supplier relationship management (SRM) programs, actually measuring those KPIs is essential for staying on track in achieving desired results.

Anyone who has tried to track business KPIs by hand knows how challenging it is. Having a software solution to help you track and monitor these performance indicators can be a great asset to your business. It allows you to analyze performance across departments and maintain high standards in supplier diversity and supplier management. With software tools, you will have the ability to build detailed reports, establish key performance measures, assess risks, and receive complete visibility of how your team is performing.

Automating the process not only saves companies time but also ensures accuracy. An ideal software solution brings together suppliers, customers and stakeholders into a single platform providing reporting and accountability to help identify areas of opportunity or any potential gaps in performance.

Tips for optimizing your supplier diversity program

Having a supplier diversity program is better than not having one. Once you have one, measuring its performance is better than not measuring it. And once you’re measuring, the next step is to start optimizing.

Implementing strategies such as actively recruiting and engaging diverse suppliers, providing support for these suppliers through educational programs that help build capacity, and developing supplier opportunities using innovative materials can all have a positive impact on your organization’s success.

Clear lines of communication between key stakeholders and the diverse suppliers is also important to ensure positive partnerships are maintained and goals are achieved. Companies should also utilize analytics to review progress, assess current programs, and determine where improvements need to be made in order to maximize success in their diversity initiatives. With a comprehensive approach like this, companies can benefit from being able to leverage a wider range of resources that result from optimizing their supplier diversity program.

Getting started

Achieving your supplier diversity goals requires careful planning and execution. By understanding KPIs and setting specific, achievable objectives, you can create a successful supplier diversity program.

Measuring your progress is essential to ensure that you are on track to meet your targets. Regularly evaluating your performance against critical KPIs will help you make necessary adjustments along the way. Additionally, be sure to keep an eye on trends in the marketplace and learn from other organizations’ successes (and failures). Finally, don’t forget to give yourself credit where credit is due—celebrate your accomplishments!

If you need assistance achieving your goals, Vendorful is here to help. Our team of experts can provide guidance and support every step of the way. Schedule a conversation with one of our specialists today to get started.

SRM-CRM Gap

CEOs Must Close the SRM-CRM Gap

Among Fortune 500 companies, 75% of spend goes to external suppliers. Yet CEOs spend only 1% of their time with suppliers on average. The conclusion is clear: from the top down, companies are massively underinvesting in managing their supplier relationships. At the same time customer relationships get significant attention. This is the SRM-CRM Gap.

What exactly is the SRM-CRM Gap?

Imagine a head of sales saying the following to his CEO: “We only have the tools and personnel to closely follow 10% of our customers and prospects. We need to segment them and focus only on the most significant.” What would the CEO do?

Probably one of three things:

  • Get better CRM tools
  • Get more people
  • Get a new head of sales

And whichever option they chose, they’d do it immediately. There is simply no way that any company would tolerate that lack of visibility into its customers and prospects.

Customer Relationship Management is so fundamental to modern business that it’s never a question of whether you manage all of your relationships, but how. 100% visibility is simply assumed.

Now consider the situation with Supplier Relationship Management in your own company. Do you have 100% visibility?

Now you understand the SRM-CRM gap.

Quantifying the SRM-CRM Gap

So we have a sense of what it is, but how big is it?

According to State of Flux’s 2021 Global SRM Research Report, most organizations have not invested in a dedicated third party system for any of the major pillars of SRM:

  • Supplier onboarding / master data (48%)
  • Risk management (29%)
  • Performance management (18%)
  • CSR/sustainability management (16%)
  • Relationship management (11%)
  • Innovation management (6%)

Can you imagine a world in which only 48% of companies invested in commercial software to track their customer data? Of course not. 91% of companies with at least 11 employees have a CRM system. That number quickly approaches 100% as the size of the company increases.

So one decent quantification of the SRM-CRM Gap is how much more the average company invests in CRM vs. SRM. For more than half of companies, that number will approach 100% of their CRM investment.

Why does the SRM-CRM Gap exist?

The reason this gap exists is simple: CEOs and CFOs see the value of CRM, and they don’t see the value of SRM.

CRM shows its value through obvious and measurable statistics:

  • Revenue growth
  • Short sales cycles
  • Higher customer retention

In contrast, SRM shows its value through more subtle measures, including soft costs and problems avoided:

  • Less time spent on routine tasks
  • Fewer adverse supply events
  • Improved vendor compliance
  • More supplier innovation

There is obviously significant value to gain from reducing those soft costs and risks, and from getting better results out of your suppliers. But it’s more difficult to quantify. Most organizations don’t do it.

Building the SRM ROI case

If quantifying the benefits of SRM are at the root of the SRM-CRM Gap, then one solution is to make SRM’s benefits more tangible. Organizations that invest in SRM save money and get more value out of their supplier relationships – a rare win-win situation.

According to data from Beroe Inc., best-in-class SRM programs deliver an ROI of 1100%. The ROI derives from the following efficiencies:

  • 50% FTE cost savings on operational tasks
  • 60% reduction in operational risk incidents
  • 30% reduction in supplier failure

Overall, organizations that apply SRM principles to at least 90% of their suppliers realize 30-35% more value than organizations that focus SRM only on their strategic suppliers.

The SRM prescription for senior leadership

The way forward is clear: executives must place a higher priority on managing their supplier relationships. But where to begin?

The first step is to define your goal. And the goal for any CEO ought to be visibility on 100% of supplier relationships.

Once you’ve established that goal, there are three stages on the path to full supplier visibility, and they don’t all need to be done at once:

  1. Develop a shared source of truth about vendor relationships. This means creating a centralized database of supplier information that can be accessed by the whole Procurement team and key stakeholders outside of Procurement and Supply Chain.
  2. Analyze supplier performance on quantitative and qualitative measures across the organization. This will help identify areas where improvement is needed.
  3. Apply business intelligence to data collected in steps 1 and 2 to visualize supplier performance and risk. Simply stated, data captures what is happening right this second, whereas business intelligence uses historical data to make predictions on future trends and problems. Early detection of issues and trends can help you avoid them becoming troubles later.

Organizations simply must know their suppliers as well as they know their customers. Technology can help get there, but the first step is to commit to changing the status quo and making it a priority to get 100% of these relationships under management.