My previous post about why supplier scorecards fail generated a lot of interest. So today I’m going to write about one of the biggest reasons for failed supplier scorecards: There is little or no action or follow through that results from the scorecards. Supply managers get so focused on the idea of having a supplier scorecard and on the content and the mechanics of the scorecard that they lose sight of just why they are developing a scorecard in the first place. By that I mean that they don’t focus on the business outcomes of having the scorecards. Scorecards for the sake of scorecards are another way of collecting data for the sake of data. You can tell the boss that yes, we’re measuring our suppliers’ performance now. Check. But so what? Have the scorecards produced any results?
What kinds of actions can and should result from a supplier scorecard system? Here are a few examples of possible actions:
- Provide performance feedback to suppliers
- Identify supplier continuous improvement opportunities
- Develop corrective actions
- Help suppliers develop a better understanding of and compliance with your performance expectations
- Rationalize current supply base
- Disengage with low performers and risky suppliers
- Recognize high performers
- Give more business to high performers
- Work on development projects with suppliers
- Create preferred or certification program
- Set criteria for new supplier on-boarding
- Establish criteria for an approved supplier list
Supplier scorecards need to show results or lose their reason for being. Suppliers should be improving their performance and your company’s as well in the process. And if suppliers are not improving, you’ve got some evidence as to why not and some information on potential improvements to pursue. The scorecards should be providing the information you need to identify and disengage poor performers and of course give your higher performers the recognition and potentially the extra business they deserve. The scorecards should facilitate measurable supplier performance improvements, be a positive business driver, and add value to the company. Otherwise, they can become an empty, bureaucratic exercise. Senior management will lose interest and will not see any reason to provide the resources required to deploy them.