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What is a supplier scorecard?
A supplier scorecard represents a ruled-based system aimed at calculating the various factors and variables that affect how businesses can get the best price and quality for their products and services received.
As a purely objective system, supplier scorecards can be used in a simple form by tracking only key performance indicators about suppliers and their performance in the form of the quality of service, number of meetings, products tested, equipment purchased, and other such metrics.
They can also go into more detail, covering more comprehensive KPIs such as lead times and on-time deliveries, contract agreements, regulatory compliance, extra services provided, finance and accounting efficiency, and more.
The scoring is aimed at measuring the company/supplier relationship, while also providing insights into how each individual vendor compares to its peers. This information is essential as it can help organizations gauge their own effectiveness as a business, providing valuable insights into what needs to change in order to make each supplier's performance more favorable.
What is supplier scorecard software?
While the vendor scorecard process is an important one, it can also be incredibly time-consuming. This is particularly true if everything that a supplier does, or does not do, is recorded by hand on a spreadsheet.
The more appropriate way of tackling the situation is to automate the process. The good news is that supplier scorecard software exists. These have tools capable of assessing and ranking vendors with minimal effort and in only a fraction of the time.
In fact, vendor scorecard software is designed to help with a process that's critical to your success. In many cases, you can use it to obtain a score from 1-100, allowing you to see how each individual supplier ranks against your customized set of criteria. In a sense, such software will grade suppliers based on your own expectations.
Main benefits of vendor scorecard solutions
Supplier scorecards solutions have a series of categories and metrics that businesses use to grade their suppliers. And while these can differ from one company to the next, most vendor scorecards will measure on-time deliveries, service quality, and overall responsiveness.
Generally speaking, scorecard systems are used to measure vendor performance, facilitate improvements, foster better supplier relationships, determine which vendors are worth keeping in your supplier base, and reward those who are worth it based on hard data.
Improving supplier performance is a collaborative experience and vendor scorecards should always be up-to-date and visible to you and your suppliers. With all of the information being in one place, it's easy to look back and see the whole picture.
Companies should not have to wait until the next quarter to check in and identify problems or create action plans. To this end, there are three main benefits that supplier scorecards provide to organizations. These include:
1. Enhanced Productivity
This refers to the company's ability to track the progress of their supplier relationships, helping them become more productive and proactive. Businesses can assign target numbers and timelines that they would like to see met by each individual supplier.
This will encourage them to work in accordance with your company's expectations, providing you with the information that shows if and where they are falling short.
2. Real-Time Reporting
With the ability to view supplier performance in real-time, companies can assess how much time is spent with each supplier as well as the reasons behind any existing delays or fluctuations in progress. This real-time data helps to optimize your decision-making process, as such leads to an increase in productivity.
3. Profit Increase
When businesses have the insight to determine which of their suppliers provide superior service and which don't, as well as act accordingly based on this information, profit margins will only stand to increase in both the short- and long-term.
Other benefits of supplier onboarding solutions
Among the other benefits of supplier scorecards software, we can include the following:
1. Increased Chance of Success
With the ability to compare different suppliers based on their performance, companies will get a better understanding in terms of which vendors are standing above the others and which are falling behind. This will help organizations increase their chances of success.
2. Better Negotiation Position
By keeping an accurate record of each supplier's performance, businesses will be able to determine with a high degree of accuracy which of their suppliers are reliable and which are not. The same thing can also be said about their pricing and price variation data gathered from scorecards. This information can be used in future negotiations with vendors.
3. Enhanced Supplier Relationships
Scorecards are designed to increase transparency and facilitate the flow of communication between vendors and their customers. Supplier scorecards prevent seemingly minor issues from turning into big ones, which is essential in maintaining long-lasting relationships.
4. Better Partnerships
Scorecards don't only improve supplier relationships but those with other partners and customers, as well. If one or more of your suppliers don't perform according to your expectations, your relationship with your clients and other partners could also stand to suffer.
5. Accurate Decision-Making
Supplier scorecards help gather insights to enable corrective action and streamline decision-making. Aside from being an analytical tool, scorecards also help organizations in self-assessing their own position and determine whether or not they keep in line with all of their business objectives.
When to use supplier scorecard software?
Suppliers play a vital role in any business, regardless of industry. Yet, if these suppliers are not performing as well as they should, their impact can reverberate throughout the entirety of the supply chain.
Supplier scorecards software can help organizations determine how much of an impact each vendor has and what changes need to be made in order to improve performance.
Supplier scorecard software will allow businesses to follow up on every issue that arises before they can grow to become a full-blown crisis. If you notice a downward trend with any of your suppliers, you can improve the situation by renegotiating and improving contracts.
While every company has its own internal structure and different marketing needs, they all stand to benefit from implementing a supplier scorecard.
The ultimate goal is to streamline processes and save money on resources, while also eliminating any unnecessary spending. To that end, businesses should look to work with the best suppliers on the market.
But how can you tell if the supplier you're looking at is worthy of your business? A vendor scorecard software is specifically designed to do just that. Its purpose is to ensure that you work well with your vendors, that everything is done on time, that the product or service they provide is the quality you're looking for, that the business is safe and that everything runs smoothly.
This supplier ranking is a worthwhile endeavor because it will help you keep track of who your suppliers are and how they can potentially improve your business's performance and quality. The key is to organize the scorecard by achieving a set of predetermined criteria and then score each supplier based on those criteria.
How to implement supplier scorecard software?
The first step towards implementing this process is to analyze your current situation. The purpose of this initial phase is to accurately determine where you stand, how your current supplier base is performing, and what necessary steps need to be taken in order to improve efficiency, build stronger vendor relationships, and streamline processes.
The next viable phase is to decide on a pilot project that will be able to satisfy all of your goals established in the previous step. Lastly, you will have to choose a procurement manager and/or team capable of seeing the project to fruition.
The type of supplier scorecard used will largely depend on the type of engagement. Regardless, the scorecard template should be versatile enough to be applicable to most vendors. This will allow you to compare performance across different categories.
The process needs to be as simple as possible, striking a balance between its accuracy and ease of being completed by the vendor. It's also a good idea to start simple with your supplier ranking process so as not to get overwhelmed by the amount of data that can be collected and analyzed. To that end, there are several steps that need to be implemented when using a supplier scorecard:
1. Transparency
Supplier management is more than just tracking metrics. It's also about building and maintaining strong vendor relationships. For that reason, it's important to be as clear as possible with your vendors so that they understand the grading process as well as the steps that will be taken if your expectations will not be met.
2. Scaling Evaluations Based On Supplier Importance
Not all suppliers offer the same business-critical products or services. As such, they shouldn't be measured by the same standards.
3. Ensuring Data Accuracy
The main purpose of a vendor scorecard is to be as objective and accurate as possible. A supplier scorecard software will help ensure both that accuracy and objectivity are critical to making the best-informed decisions possible.
4. Engaging With Internal Stakeholders
Since procurement teams are not the most engaged with vendors on an ongoing basis, they don't usually get the clearest picture of their suppliers' performance. During this process, it's best to include department heads, system users, and other internal stakeholders as they regularly interact with suppliers.
How Prokuria can help, why is different?
If your organization can't keep up with all of its supplier requirements, Prokuria will enable you to easily maintain supplier scorecards and seamlessly evaluate your vendors.
By using Prokuria, you can create your own supplier scorecards by selecting a number of standard criteria. This will then let you compare and contrast them and rate them on a scale.
The main purpose of the Prokuria platform is to streamline supplier management and make all of our client's jobs easier. You can easily evaluate your suppliers as well as maintain a scorecard for easy access in the future! This way if something goes wrong with one of them, then you don't have to spend countless hours going through all the others just so they'll take responsibility for it.
Give us a try and see how easy it is to start creating supplier scorecards. You can create an account here, sign up with no credit card required!
We've got your back if you run into any questions along the way - just book a free demo and we'll show you how easy it is to evaluate your suppliers with Prokuria!