What is supplier performance management?
Supplier performance management (SPM) refers to business practices associated with collecting and analyzing supplier performance. When performed well, SPM enables a business to reduce costs, alleviate risks, and drive continuous performance improvements across the supply base. Methods for achieving SPM are widespread, varying in the cost, time and resources required. They include site visits, third party audits, routine meetings, questionnaires, scorecards, and more.
What are supplier scorecards?
A Supplier Scorecard is an efficient, data-driven tool for conducting supplier performance management. Both cost and time effective, Scorecards consist of business-relevant categories and metrics against which suppliers are assessed, often on a point-based rating system by both internal and external respondents. Scorecards provide a quick snapshot of supplier performance and serve as a foundation for corrective actions.
7 Benefits of Supplier Scoring
Align suppliers with business goals and KPIs
When you establish supplier expectations and deliverables that link to corporate objectives, you ensure performance improvement initiatives are focused where they’ll have the greatest impact.
Alleviate supply chain risks and potential disruptions
By assessing performance across the supply base, you’ll gain proactive insight into areas of risk so you can instill corrective actions before it causes disruption.
Boost transparency and information sharing
With so many teams interacting with suppliers, gaining a holistic understanding of your relationship can be a challenge. Scorecards give a voice to all stakeholders and leverage the collective knowledge of the company.
Stronger collaboration and communication with suppliers
Working from an agreed-upon Scorecard ensures suppliers are aligned with your business and clear on expectations. Scorecards drive accountability and enable teams to work together towards issue resolution as partners.
Drive continuous supplier performance improvements
With recurring performance reviews, you’ll understand not only how your suppliers are performing today but also how they’re evolving through time.
Recognize hard and soft cost savings
Strong supplier relationships and clear expectations has been shown to significantly reduce cost - whether through the opportunistic capture of savings or the avoidance of expensive mistakes.
Supplier scoring introduces a common language across the supply base, facilitating standardization and easier comparison across suppliers.
Ready to recognize these and other benefits? Contact us to get started.
Which suppliers should I score?
Depending on the nature of your business and the suppliers involved, it may be possible and favorable to score all suppliers. LVRG is purposefully designed to be a quick, easy and standard scoring solution to make this possible. However, with limited time and resources, we recommend a business focus performance evaluations on high-value, strategic suppliers. Start by segmenting / tiering your supplier master list to identify those most strategic to your operations. When your organization is in full-swing scoring your top tiered suppliers, consider expanding your reviews to include the next tier.
Which metrics should a scorecard track?
Every business is unique, and as business objectives change over time, the expectations of your supply base may change too. To accommodate evolving priorities, LVRG scorecards are fully customizable. However, there are common, research-backed categories and metrics that have been proven to drive supplier performance improvements over time and are a good starting point for your business. These include, but are certainly not limited to:
PRICING - Competitive pricing, price stability, cost reductions, billing accuracy, etc
QUALITY - Conformity to specifications, warranty, defects, enhancements, etc
DELIVERY - Lead time, shipment delays, order accuracy, etc
FINANCIALS - Financial solvency issues, pricing model, credit frequency, etcs
ACCOUNT SUPPORT - Technical support, availability, reliability, issue resolution
INNOVATION - Collaboration, use of leading technology, investment in the future, etc
SECURITY AND RISK - Security data breaches, health and safety issues, NDA breaches, other negative news events, etc