Improve the Effectiveness of Supplier Scorecards | DCR Workforce Blog

Improve the Effectiveness of Supplier Scorecards

Strategic Use of Scorecards:

Critics may call it a bandwagon technique, but the fact remains that the use of a scorecard to measure supplier performance is becoming more and more common in the industry. Quite a few have it and those that do not, definitely want it. CW managers eagerly and readily translate this measurement into management input, by applying the insights to improve a supplier’s ongoing performance and delivery. Or, do they?

Many a time, the benefit of tracking a supplier performance through scorecards comes from an automatic ‘Big Brother is Watching Us’ kind of discipline with an automatic and reactive ‘best behavior’ response ­­from the suppliers. This is bound to showcase a definite improvement – which may or may not last for very long.

Effective use of Scorecards:

While there is no one way to create a scorecard,  the many parameters involved make it even harder to clearly identify the core factors that need to be tracked to derive optimum benefit through the resulting process improvement opportunities. Effective use of scorecards is possible only when the structure is put in place for the total strategy from the word – Go. For those who already have a scorecard in place and feel that they are not deriving an optimum actionable output from it also, a review exercise with clarity for the end result may be the answer.

Measure metrics that are important and relevant to the business and its goals rather than choose easily available metrics which may not be equally meaningful or desired.

  • Do not go for a large number of metrics just because it is possible to do so. Quantity does not always lead to quality. Too much information makes it harder to gain a clear understanding especially in comparative terms.
  •  The criteria may be weighed on a rating scale and given values which make it easier to prioritize upon the important ones and allow for a comparative assessment of the performance of the various suppliers.
  • Customize the scorecard components to the organization’s particular needs rather than adopt or copy another firm’s scorecard just because they are from the same industry or are expected to track similar metrics.
  •  It helps to obtain the sign-off of senior management for the effectiveness and relevance of the metrics being tracked to the goals of the organization and business.
  •  The metrics need to be objective rather than subjective and allow for acceptance without question by all stakeholders. Data should be carried to the scorecard without requiring too much of tweaking and cleansing
  • Internal stakeholders need to be committed, proactive and responsible in their approach to the activity of collecting the data inputs required for the scorecard. Attention must be paid to the feasibility of having access to the data/information (if it is internally available or needs to be obtained from the supplier) before adding it to the scorecard inputs.
  • Evaluating the probable time commitment – of the number of resources and the total time that would be required to track the data which would be correlated to the number of suppliers on board – could save any unnecessary embarrassment of having to give up the whole exercise midway, due to a paucity of time or resources.
  • The scorecard results must be shared with the suppliers, irrespective of the standard of their performance levels – and absolute clarity provided on organizational expectations, with target areas of good-to-have and must-have improvements.
  • All appraisals need to be necessarily followed by appropriate revisions to the tiered supplier list (where Tier 1 gets the first shot at any requirement), corrective measures and even disengagement to impress upon the suppliers that their ongoing relationship with the organization will be impacted in a positive or negative manner as a result of the scorecard assessment.

Any real management of suppliers based upon scorecard data requires a lot of effective change management effort encompassing the overall supplier performance; where it could serve as an essential tool to facilitate such transformational changes rather than being the only tool employed to dictate the change.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.