Supplier Scorecards: A Data-Driven Approach
Using Supplier Scorecards can enable companies to take a more objective, data-driven approach to the supplier selection and management processes.
Why would you use a Supplier Scorecard?
Companies want to partner with suppliers that help them meet business goals and objectives. Leveraging a tool like the Supplier Scorecard can assist in selecting the best Supplier for an engagement. In addition, it can help to combat:
- ‘Always’ selecting the lowest bidder,
- ‘Always’ going with the highest paid person’s opinion,
- Only selecting suppliers encountered in the past, and
- Taking a subjective approach to supplier selection.
How are Supplier Scorecards used in Supplier Selection?
As mentioned in Part 2 of the Source-to-Pay series, the use of a Supplier Scorecard during the selection process starts by defining specific performance measures that are important to the organization for the engagement. Once the measures are identified, a weighting is placed on each measure based on its importance. Information is gathered, and each supplier’s scores are placed in the scorecard and a ranked list of suppliers is determined. Based on the data-driven measures, the Supplier with highest rank would be selected and alternates can be defined.
How are Supplier Scorecards used in Supplier Management?
By sharing your criteria with the selected supplier, they are better able to understand what is important to your organization and how they can meet the defined objectives. Leveraging these data-driven metrics in an ongoing, collaborative way also helps the supplier to be clear about expectations and take pride in the long-term relationship with your company.
How to avoid Supplier Scorecarding Pitfalls?
The Supplier Scorecard can be a powerful tool; however, it is important to start by addressing some of the pitfalls that can occur.
First, be sure to define the right metrics that lead to value creation for your organization and the Supply Chain. Simply selecting measures that are readily available won’t guarantee that you end up with the desired result. Go through the exercise of determining the right measures for the engagement.
In a similar line of thinking, using the same measures for all engagements may not lead to the desired end goal. Leverage the goals and objectives for each engagement to determine the right measures each time.
Third, it is possible that the measures selected could lead to unintentional consequences. Review the measures being considered and the potential behaviors and outcomes that could result before making for your final decisions.
Finally, once your evaluation team has defined the weighting of each measure, don’t change it after the fact to get a ‘desired’ answer. By changing the weighting after the fact, it defeats the purpose of the tool. Agree up front what is important for the engagement and don’t make changes during the selection process.
Are you ready to start using a Supplier Scorecard?
Your organization may already have a Supplier Scorecard template designed to meet your business needs; however, if you’re starting from scratch, consider downloading a template from this link to get you started.
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