Scorecards have become the Holy Grail of supplier performance management. I find that most companies have some kind of supplier scorecards. And if not, they are in the process of developing them or want to develop them. Expectations for results are high. However, very few firms are satisfied with either their scorecards or the results that they are getting from the scorecards. When asked if the scorecards are providing results and whether supplier performance has improved, very few respond positively. While the supplier scorecard practices that I see are not comprehensive, the challenges of scorecards that firms are facing appear to be fairly common.
Why is developing an effective supplier scorecard such a challenge? Here are 11 reasons why supplier scorecards fail:
1. Metrics or KPIs (key performance indicators) are not meaningful since they measure what is easily measured rather than what is important to the business.
2. Some firms try to measure too many KPIs or too many suppliers to be effective
3. Metrics are borrowed from other companies and are not sufficiently meaningful to the borrowing firm.
4. Metrics do not support or are not aligned with a firm’s business goals.
5. Scorecards lack credibility and thus are subject to doubt and dispute.
6. Scorecards require too much data cleansing and manipulation to produce.
7. Internal stakeholders don’t provide input on a timely basis or not at all.
8. Scorecard results are not regularly shared with suppliers.
9. Suppliers are unclear of customer performance expectations
10. There is little or no action or follow through that results from the scorecards. (i.e., suppliers do not see recognition, rewards, corrective actions, or disengagement as a result of their performance)
11. Scorecards do not get to the root causes of problems, making it difficult to take corrective actions.
In future posts, I will discuss some of these reasons for failure and what you can do to improve your chances of supplier scorecard success.