Originally posted on on the e-Sourcing Forum [WayBackMachine] on September 18, 2008

A basic two-way scorecard is a scorecard that allows a supplier to provide feedback on how well a buyer is providing it with information, paying on time, and managing other key elements of bilateral performance. It is designed to ensure that there is a two-way flow of information, and feedback, regarding the service that the supplier is expected to perform on behalf of the buyer. A more advanced two-way scorecard measures supplier and buyer results across a balanced set of categories with combined metrics that merge component metrics tailored for each party. It is designed to insure that there is both information flow and cooperation (and collaboration) in the relationship, as the merged metrics will only be good if both the supplier and buyer component metrics are good — and the component metrics will only be good if there is collaboration. For example, the “customer service level” metric will be computed based on the average supplier delivery time and the average accuracy of the monthly buyer forecast. After all, if the buyer tells the supplier to prepare for a slow month when, in fact, orders are about to double, should all the blame rest on the supplier who was not given a chance to prepare?

Needless to say, two-way scorecards are not only more work than traditional scorecards, but they also require more up-front effort to make them work (but they payoff is worth it). Fortunately, there is a recent piece over on the Supply Chain Digest site that describes the keys to implementing dual buyer-supplier scorecards successfully for those new to the concept. According to the article, best results stem from best practices, and the best practices they list are the following:

Rely on Senior Leadershiop

Senior leadership must emphasize internal accountability as well as supplier accountability and insist upon the new scorecarding methodology.

Choose the Best Managers

Insure the implementation is led by top-performers on each side.

Focus on Critical Items

Focus on those items and metrics that have the biggest impact on customers.

Use only with Strategic Suppliers

The approach requires long term commitment — on both sides.

Broaden the Involvement

Create cross-functional teams and insure all key areas are measured by the metrics.

Be Practical

Aim for “best-fit”, not “perfection”, in the metrics. The metrics should be easy to define and to track.

Engage the Supplier

Metrics need to be selected jointly, and agreed upon jointly.

Communicate the Value

Be sure to understand, and communicate, how the initiative is going to benefit both parties.

Recognize Performance

Rewards and recognition go a long way. Be sure to congratulate top performers appropriately.

Allow for Evolution

No one gets it (completely) right the first-time. Revisit the scorecard regularly and re-define the metrics as appropriate as part of a continuous improvement initiative.