1. What is a Supplier Scorecard?
2. When to Use a Supplier Scorecard at Your Organization?
3. 5 Steps to Create the Best Scorecard Tailored to Your Needs
4. Use DeepStream to Access Valuable Data for Your Supplier Scorecards
5. 7 Best Practices of Using Vendor Scorecards
6. The Must-Have Procurement Software to Elevate Supplier Scorecards and RFx Processes
While a considerable amount of work goes into the supplier selection process, it’s only half the battle for your procurement team.
Once you’ve selected a vendor, you’ll begin to form a business relationship with them - which includes finding ways to measure supplier performance to ensure they meet your standards. That means developing a series of key performance indicators (KPIs) that both parties agree upon.
How do we do that effectively?
Enter the supplier scorecard, the preferred format for evaluating vendor performance in a formal, documentable way.
Using scorecards provides regular and timely feedback to vendors which often leads to improved vendor management, as you’ll have a tangible way to guarantee product/service quality, timeliness of delivery, and other crucial KPIs. That will also help you mitigate supply chain risks to avoid costly issues like delays, missed deliveries, and low-grade/broken goods and materials.
Being able to create a detailed vendor scorecard is an essential skill of any procurement team, which is why we’ve compiled this guide containing everything you need to know. You’ll not only learn how to develop supplier scorecards but also key best practices that go into creating them.
What is a Supplier Scorecard?
A supplier scorecard (or vendor scorecard) is a document containing crucial metrics that grade the performance of a third-party supplier.
Traditionally, these metrics include the quality of goods/services provided, the timeliness and reliability of deliveries, prices, and customer service - but every scorecard is unique to the needs of the organization creating it.
Each metric has to be something quantifiable that’s backed up by a number or statistic.
Where do the metrics come from?
Supplier scorecard metrics can come from a few different places, but most commonly, they’re derived from existing RFP and RFQ forms and the responses from vendors.
You should also consider which factors will ultimately determine the success of your project and include those as metrics, too.
When to Use a Supplier Scorecard at Your Organization?
Generally, supplier scorecards come into play during the vendor onboarding process - which occurs after selecting them and signing a contract.
The onboarding process is the ideal time to go over your scoring criteria with the new vendor. That will grant you both the ability to view and agree to the supplier scorecard metrics - which is why it’s best to introduce scorecards as early in the vendor relationship as possible.
After onboarding, supplier scorecards tend to go out on a quarterly or annual basis. Typically, quarterly scorecards tend to be more basic, with annual scorecards containing deeper insights.
Using scorecards on a regular basis is how you will manage your vendor relationships to ensure continued positive performance.
5 Steps to Create the Best Scorecard Tailored to Your Needs
You’ll want to create a vendor scorecard template that’s versatile enough to work for all your suppliers - albeit with a few key tweaks.
An ideal scorecard also strikes a balance between keeping things simple and maintaining an accurate overview of your unique standards.
Remember, your supplier scorecard is a way to enhance and optimize your vendor relationships, not criticize them or completely overhaul the way they do things.
Here are 5 straightforward steps to follow when developing a vendor scorecard template.
1: Review Your RFx Documents
First things first, you’ll want to put all the research and hard work that went into your RFPs and RFQs to good use.
Compile all your RFx documents, vendor responses, and the contract to examine them closely for metrics you can use on your scorecard.
Keep an eye open for the most important factors from the RFP process. Also, look for any established service level agreements (SLAs) that you can use on the scorecard.
2: Create Performance Categories
Now it’s time to group related questions together into performance categories. For example, you could include product quality as a performance category and include additional metrics within it (like density, purity, etc.).
That will create a natural flow to your scorecard, which will make it easier for your vendors to comprehend. That way, they’ll know what they need to do to stay in compliance with each performance category on the list.
3: Order Metrics According to Level of Importance
For each metric, ask yourself what will happen if the conditions are not met. What will this mean for you, and how will it affect your operations?
That will help you organize your metrics in order of importance on your scorecard.
Why is this essential?
It is because certain facets of vendor performance will matter more than others. That will help your suppliers know which areas they should focus on the most.
4: Decide on a Grading Scale
You’ll want to agree on a universal grading scale that you use for your scorecards.
For example, are you going to go with a ‘yes or no’ format for metrics (i.e., Did the product meet our standards? Yes/no), or are you going to use a percentage instead? (i.e., Did the product meet our standards? 88%).
It’s up to you which format you choose, but make sure the vendor knows the format as well, so you’re on the same page.
5: Start Evaluating Your Suppliers
Now it’s time to try out the effectiveness of your scoring card by putting it into practice. Bear in mind that the first time you use your scorecard is a bit of a learning experience for both parties.
For instance, if your vendor receives a low score at first, it may not be their fault entirely.
It could be that you’ve yet to optimize your communication or due to another issue unrelated to their actual performance.
It’s crucial to sit down with vendors after analyzing the scorecard to see where you can both improve. Issues may arise from lots of different places, such as accounting, logistics, or merchandising - so it’s crucial to closely examine each metric where they scored poorly.
From there, you’ll get into a groove with your supplier scorecards, and their effectiveness will improve as a result.
Use DeepStream to Access Valuable Data for Your Supplier Scorecards
To make assembling scorecard criteria a breeze, consider using DeepStream, an intuitive cloud-based RFx software platform.
It will enable you to automate key RFx processes (such as templates for your RFPs, RFQs, and RFIs), track vendor responses, and use tools to evaluate each supplier.
That means you’ll have all your essential documents (RFPs, responses, service-level agreements, etc.) to form scorecard criteria in one convenient location - greatly simplifying the process.
DeepStream can easily integrate with your existing business workflows, and we can get you completely set up within 2 days - so don’t wait to request a demo now.
7 Best Practices of Using Vendor Scorecards
As with anything else, some ways of approaching supplier scorecards are more effective than others.
These 7 best practices will ensure you stay on the right track when developing your scorecards. That way, you’ll wind up with supplier scorecards that will greatly enhance your vendor management instead of hinder it.
1: Keep it Simple (Don’t Get Overly Specific)
At the beginning of a new vendor relationship, it’s best to keep your evaluation as simple as possible.
Why is that?
It’s because the relationship is still fresh, and you need some time to get into the groove of working together. As such, including a supplier scorecard that contains rigorous standards that are highly specific - you risk overwhelming the vendor.
For this reason, it’s better to start small with your scorecard and then build upon it later as you become more familiar with one another.
Starting with a simple format will also make things easier for your procurement team, as they won’t have overly complex scorecards to deal with right off the bat.
Lastly, standardizing the format of your scorecards (i.e., asking general questions instead of getting vendor-specific) so they can work for multiple vendors will save you a lot of time and effort.
2: Use a Universally Understood Rating Scale
Next, you need to ensure the rating scale you use is common enough that a vendor will instantly know how well they scored at first glance.
- For instance, if you choose to use a number scale, you should stick with a ‘five-star’ or ‘10 point’ scale - as they’re the most common.
- If you use a scale that’s out of four (or another uncommonly used scale number) - it’s likely to cause your vendors to become confused or think they did worse than they did. As an example, if a vendor scores a ‘three,’ but it’s on a scale out of four, they did better than if they scored a 3 out of 5 - so stick with the classics.
- If you use a percentage, always make it out of 100% - and so on. If that’s too granular for your taste, you can use phrases like ‘meets expectations’ or ‘failed to meet expectations.’
You just need to ensure that the scale you use is instantly identifiable and not confusing.
3: Don’t Try to Measure Every Single Thing Possible
While it’s important to be thorough in a supplier scorecard, an excessive length will not only be cumbersome for your vendors but also for your procurement team.
Shorter surveys are much more likely to be completed than longer ones, which is why you should strive to make your scorecard as compact as possible. To save on space, use basic language and be concise wherever you can.
The more you can minimize the brainpower the vendor has to use to fill out your scorecard, the better.
After all, you want them to be able to remain focused on evaluating their score instead of attempting to make heads or tails of what’s being asked of them.
4: Remain Transparent with Vendors
The standards on your scorecard shouldn’t come as a surprise to your vendors. Instead, you need to clearly explain your scoring criteria beforehand, so you’re both on the same page. Go over how you’ll grade their performance, as well as what will happen if your expectations aren’t met.
This transparency will also make it easier for suppliers to meet your standards, as they’ll have a clear understanding of what’s expected of them from the get-go.
Supplier scorecards and vendor management is about a lot more than simply tracking performance metrics.
Instead, they’re primarily about forming and maintaining positive relationships with vendors, which is why you’ll want to remain as transparent as possible during the process.
5: Customize the Scorecard According to the Vendor’s Importance to Your Business
Some vendors will be more crucial to your operations than others. As such, they should receive more thorough and robust scorecards than the suppliers that only have a marginal impact on your business.
To save time, you can standardize a few supplier scorecard templates.
- For vendors that have less of a significant impact on you, a bare-bones scorecard will suffice.
- Conversely, you’ll need to create a more extensive scorecard template for the suppliers that impact your business the most (while ensuring it’s not too long or complicated).
6: Ensure Your Data is Accurate & Impartial
Your supplier scorecards will only be as accurate as the data you use for them - which is why you’ll need to take measures to ensure it’s as precise as possible.
The best way to do that is to use a vendor management system like DeepStream to keep track of all your vendor data and communications.
That way, you’ll know for sure that the data you use for your scorecards is as accurate as humanly possible.
7: Consult Internal Departments That Interact with Vendors
Your procurement department isn’t the only one that interacts with vendors. In fact, lots of internal departments and employees will work with them, including warehouse managers, accounting, logistics staff, and more.
You’ll want to consult with these team members to get a complete picture of how well a supplier is performing/meshing with your organization.
The Must-Have Procurement Software to Elevate Supplier Scorecards and RFx Processes
By now, you should have a solid understanding of supplier scorecards, how they work, and the best practices that go into creating one.
If you want to turbocharge your RFx processes while making gathering scorecard data effortless, consider DeepStream.
With our platform, you can automate RFx workflows, track supplier responses, and evaluate supplier qualifications all in one spot.
In 2 short days, we can set up DeepStream and integrate it into your existing business workflows, so don’t wait to start to check out its time and money-saving features for yourself.
