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.
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
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.