Scorecards Have Value … But Only If They’re Constructed Right

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There’s been a lot of buzz around scorecards over the last few years, but, as noted in a recent article in the Supply Chain Management Review, only a handful of companies have effectively utilized them to drive value. Wal-Mart is one example … Canada Post is another.

To be effective, scorecards need to be simple in concept, with metrics that are clear and easy to assemble, yet measure the few, truly impactful supplier actions. The biggest mistake companies typically make is designing overly complex metrics that are confusing to suppliers. A good scorecard selects a handful of the most important metrics that will allow the supplier to focus on the most important factors. These operational metrics, that focus on cost compliance, service performance, quality and damages, and administrative efficiencies, allow the supplier to monitor is performance and improve over time.

And to be truly effective, the scorecard needs to be:

  • used frequently
    once or twice a year isn’t enough … they should be reviewed monthly
  • ranked in a weighted fashion
    as this allows a supplier to get an overall picture of its performance
  • monitored
    the article recommends a dashboard … but a report that calls out the most important issues will do just fine
  • improved collaboratively
    if the supplier is doing well on the scorecard, but not meeting your needs, then the scorecard needs to be refined
  • implemented in three phases
    for details, see the article on unlocking value through the supplier scorecard