supplier scorecards “you can’t improve what you can’t measure.” dr. michael hammer,...

Supplier Scorecards“You can’t improve what you can’t

measure.” Dr. Michael Hammer, Re-Engineering the Corporation

November 17, 2011

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Why use a supplier scorecard?Aligning corporate goals with supplier performanceShould all suppliers be measured by a scorecard?Characteristics of good metricsSuccess factorsExamples…

Agenda

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1. Understand their suppliers and their capabilities2. Gain better insights into their suppliers’ performance3. Build mutually beneficial relationships with suppliers4. Identify, prevent and mitigate supply risk5. Set criteria for new supplier on-boarding and an approved supplier list6. Put realistic SLAs (Service Level Agreements) into supplier contracts that are

based on performance information gained from SPM7. Rationalize suppliers based upon performance information8. Disengage with low performers and high-risk suppliers9. Give more business to high performers10. Identify supplier continuous improvement opportunities11. Gain insights that help suppliers improve their performance and reduce costs and

risks12. Work on product or service development projects with suppliers13. Create preferred or certification programs

Why use Supplier Scorecards?

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Process?

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Aligning corporate goals with supplier performance

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Should all suppliers be measured by a scorecard?

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• 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."

Characteristics of good metrics

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6 Success Factors

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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.

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Examples

Q & A

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How to reach me:

Meri M. Stockwell, MBA, CEPOwner / President

Meri M. Stockwell, LLC.Procurement Consulting, Training

& Recruitment

meri@procurementexpertise.comwww.procurementexpertise.com

727.260.2085Twitter @MeriMStockwell

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 Thank you for the opportunity to be here tonight

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