The scorecards aim to help you identify the performance and evaluate your suppliers regularly.
This is an important process that needs to be implemented also in small businesses. Your suppliers can affect your bottom line and business performance. It is important to find out which ones are performing well, and which ones are struggling.
A supplier scoring system helps you evaluate and rank your suppliers against pre-defined criteria. The more criteria that a supplier meets, the higher will be its score.
If you are planning to implement a scorecard, let your suppliers know how it will work and share the rules of the game.
How to create a supplier scorecard in 6 easy steps
Step 1: Establish your KPI’s.
Each organization has its own unique characteristics. So, when it comes to choosing your criteria, you need to analyse your goals and align them with the organization’s vision.
As your business grows, it’s important to keep track of your key performance indicators (KPI) to make sure they reflect your current needs and are moving your departments and suppliers toward the general goal. Your KPI list should include a few keywords that describe your expectations.
Step 2: Gathering Data
Your company’s data might be scattered across various systems and applications. It’s important to gather all the details to understand the complete picture. Will be better to manage a centralized archived to have better organization in your data.
Step 3: Choose the right criteria to calculate the scorecard
There are many models that can help you gather a final score. However, make sure the model is suitable to evaluate at least 3-4 top key performances that you expect from your suppliers. Assign the highest weight to the most important performance. You can develop a matrix to multiply the performance by the assigned criteria, make sure the percentages sum 100%, as the following example.
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Step 4: Provide Feedback to Suppliers
Once you have the evaluation, explain the results and feedback to your suppliers. Developing a strong relationship with suppliers is very important for your business. Therefore, it is a good idea to share your scorecard regularly.
You can develop and implement an improvement plan with your supplier to help them understand your requirement and expectation for the next scorecard.
Step 6: Update Information
Analysing the data collected by your company can only provide a limited view of the events and situations that occurred within that organization. To ensure that the information is accurate, you need to regularly update the details.
Control the process and improve it on the journey.
Article by Irasema Calvo for The Outlooker. Irasema is a Sr. Supply Chain Manager globally recognised per overachieving Cost Savings Projects.