1. Supplier Scorecards November 17, 2011
“You can’t improve what you can’t measure.” Dr. Michael Hammer, Re-Engineering the Corporation
November 17, 2011

2. Agenda Why use a supplier scorecard?
Aligning corporate goals with supplier performance
Should all suppliers be measured by a scorecard?
Characteristics of good metrics
Success factors
Examples…

3. Why use Supplier Scorecards?
Understand their suppliers and their capabilities
Gain better insights into their suppliers’ performance
Build mutually beneficial relationships with suppliers
Identify, prevent and mitigate supply risk
Set criteria for new supplier on-boarding and an approved supplier list
Put realistic SLAs (Service Level Agreements) into supplier contracts that are based on performance information gained from SPM
Rationalize suppliers based upon performance information
Disengage with low performers and high-risk suppliers
Give more business to high performers
Identify supplier continuous improvement opportunities
Gain insights that help suppliers improve their performance and reduce costs and risks
Work on product or service development projects with suppliers
Create preferred or certification programs

4. Process?

5. Aligning corporate goals with supplier performance
Improve customer satisfaction by 10%
Corporate Strategy
Firm eliminates customer complaint causes
Procurement Strategy
Firm reduces supplier linked quality leaks
Supplier Performance Expectations
Supplier deploys proactive quality plans
Measures
Supplier deploys root-cause analysis plans
KPMs
Metric # of quality defects
Metric # of supplier items bypassing inspection
27% performance improvement

6. Should all suppliers be measured by a scorecard?
Divide suppliers into strategic, collaborative, custom and commodity quadrants
Concentrate on strategic suppliers who are integrated business partners as well as core suppliers, who require integration and development
Plus other suppliers that may supply a high-cost or high-risk item.
In terms of performance management:
a simple approach is to review suppliers who represent the top 10-20% of spend.
Divide them into direct and indirect.
Then rank them based on the factors established (see example)
Use a simple scoring methodology such as "Low=1," "Medium=2," and "High=5."

7. Characteristics of good metrics

8. 6 Success Factors 1. Management buy-in and support.
Demonstrate to senior management not only cost savings and risk avoidance, but also the value that high-performing suppliers can bring. 
2. Alignment of SPM with company and organizational goals and objectives. Without alignment, value is more difficult to demonstrate to senior management. As discussed, don't create SPM in a vacuum.
3. A good process in place. SPM is a business process, not a scorecard. SPM requires a good, closed-loop business process in place in order to add value and to succeed. 
4. Communications: with suppliers and with the stakeholders in your firm. Don't keep SPM a secret between Procurement and suppliers. Communicate performance expectations with suppliers. They will appreciate it. Communicate the results with suppliers. Raise SPM visibility and broadcast success. Otherwise, SPM may die on the vine because only Procurement can see the benefits.
5. Actions. SPM without actions, improvements, and follow-up is futile. Go beyond collecting data for the sake of data. Deliver improved supplier performance, reduced costs and increased supplier value.
6. Measurable results. An SPM system is about results. When properly deployed and fully adopted, SPM can create both top line and bottom line value. Capture the value and communicate it to management.

9. Examples

10. Q & A

11. Thank you for the opportunity to be here tonight
How to reach me:
Meri M. Stockwell, MBA, CEP
Owner / President
Meri M. Stockwell, LLC.
Procurement Consulting, Training & Recruitment
Affiliated with…