In this economy and with all the pressures, are your key suppliers delivering the performance you expect? Have you run into any of these issues:
- Inconsistent quality throughout a production run or from shipment to shipment?
- Product not packaged or labeled as specified?
- Quantities are short or there are excessive overruns?
- Late deliveries?
The impacts to your company are bad enough, affecting your costs due to rework, inspection, or slowdown in production, but the real and lasting impact is failure to meet your customer’s delivery or quality expectations. You may also be paying too much for materials, which of course comprise a very large percentage of the total cost of print or mailings. Do you know if your costs are competitive? If not, it contributes to loss of sales opportunities for you.
These are just a few of the purchasing and supplier challenges facing organizations today. What can you do about it? Do you change suppliers? Add extra inspection to your process? Changing suppliers frequently or taking other actions internally are costly solutions. A more effective solution is to implement a rigorous supplier scorecard process. This provides a mechanism for objective two-way communication that can strengthen mutually beneficial relationships, and make both companies better.
Implementing a Supplier Scorecard
The basics of setting up a scorecard are relatively simple – decide what you want to measure, and the relative importance of each factor. Review any current issues and performance problems, as well as customer-identified quality expectations, and these become your measurement factors. Take the time to think about what happens to your organization if the standard is not met. Then establish a simple ranking of 1 to 5 on worst to best.
Once the scorecard development is complete, communication and training come next. Communicate the goals for the supplier scorecard both internally and to your suppliers well in advance of the first evaluation. The communication with suppliers may clarify or establish clearer expectations than existed before. It should also open the door to regular feedback from the supplier on what you and your company may do differently to enable them to more effectively meet your requirements. Scorecards should be reviewed quarterly or at minimum twice per year or you won’t get a balanced picture or have opportunities to make course corrections.
Top-level reinforcement of the importance of fair, accurate, detailed, and timely input to the scorecard is critical. It must be clear that the scorecard does not, of course, replace the need for timely resolution of any specific issue with a supplier, but it provides visibility into overall performance and trends that need to be reinforced, or corrective action initiated.
In addition, if you are penalized for failing to meet standards with your clients, any suppliers who contributed to that failure should also be held financially accountable. However, penalties are not the goal, they are just more enforceable with clear communication and measurement. The benefits to this best practice will be trusted suppliers you can count on to make your business run optimally, providing you with pricing and quality that make your end product better which in turn gives you an advantage over the competition. Just firing poor suppliers who don’t “make the grade” makes it more difficult and costly for you to make the grade with your clients. Knowing who you can count on every day, as well as when you have a critical need can be a major advantage.