When utilizing an external supplier, it is very important to practice proper supplier relationship management. One way to do so is to enact a supplier scorecarding process. Scorecarding is a method that frequently evaluates or "scores" the supplier based on their performance. It helps focus your suppliers on what areas matter most to your organization, and gives them an awareness regarding how they should work with you. Applying these best practices can help make your scorecarding process more beneficial.
Know What You Want
When embarking on the supplier journey, you need to know what you want, specifically in terms of business goals. Develop a baseline understanding of what you want done, how you want it done, and how soon you want it done by. Use this baseline to establish performance expectations for your supplier. Making these clear right away increases the likelihood that you will find the right supplier match.
When it comes time to generate performance metrics and key performance indicators (KPIs), apply the rule of quality over quantity. You want your specific goals accomplished the right way, there is no need to rush the goals through subpar work, or take extra time to complete additional, unrelated tasks. While doing so, remember to align the KPIs with your business goals- outlining them in the initial contract- and to establish a timeline in which the supplier is expected to operate and complete tasks.
Establish a Performance Evaluation Review Process
Once the proper metrics are incorporated into the scorecard, you must generate processes to communicate performance to suppliers. This covers situations such as positive recognition and reward, granting new business to existing suppliers, and cutting ties with underperforming ones. Evaluations should be conducted on a continual basis, and can be incorporated into the timeline.
Communication and Action
When you complete the evaluations and communicate the results to the supplier, it's important to then identify areas of needed change and even more so to take coordinating action. Constant communication between managers and suppliers provides for stronger relationships and ideas to be shared.
Share Information Internally
All stakeholders within your company, even those outside of Procurement and Supply Management, need access to supplier performance information. Further, the scorecard evaluation needs to be easy to use and understand for any stakeholders requiring access. In short- if someone could potentially be impacted by supplier performance, they need to be able to have in idea of the suppliers' performance levels. This will help create cohesion and mitigate risk throughout the entire organization.
Ensure Alignment Across all Parties
When implementing anything, its important to ensure that everyone involved is on board with and in support of it. The supplier needs to know that they will be monitored, what they will be evaluated on, and in what time frame they are to produce and will receive evaluation results. Make sure your vendors are happy with the process, and allow for feedback throughout, being flexible and willing to make reasonable adjustments as you see fit. This will help improve your potential to attracting more vendors in the future, and possibly harvest innovative ideas.
Other stakeholders within the organization also need to feel comfortable with the scorecarding and evaluation process. If they do not understand or agree with its measures, they are less likely to utilize the tool, therefore lessening the value of even having the process.
Establishing an optimal scorecarding process aligned with business goals and timelines and coordinating it with all stakeholders can bring a great deal of value to your organization. Utilizing a proper system can enhance current performance as well as setting the scene for future improvements- it allows you to identify strengths and weaknesses in current suppliers, giving you a detailed picture of what you should be looking for externally and reaching toward when moving forward.