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.)