PurchTips edition #234

For many organizations, going from not having a supplier management strategy at all to the point of using supplier scorecarding can feel like a major accomplishment. But getting to the point of measuring supplier performance is more of a beginning than an end.

“There’s so much focus on finding the right metrics for the scorecard, collecting them, [and] managing the data that some companies lose sight of what they are trying to do,” says Sherry Gordon, the President of the Value Chain Group, a consulting firm that specializes in supplier management process design and development. “The reason you’re doing [scorecarding] isn’t just to have a scorecard, but it’s actually trying to get your supplier[s] to improve.”

Following up on needed corrective actions that were revealed during scorecarding is key to turning supplier performance measurement into supplier performance improvement. “As you identify opportunities for improvement with your key suppliers, you should track them, discuss them with the suppliers, and follow up on them until they’re resolved,” advises Gordon.

Failing to follow up on corrective actions requested may make some suppliers treat your supplier management program like a charade and, therefore, performance for you will not improve. “If there’s no follow up, then suppliers will quickly catch on and understand that you’re not going to do anything,” observes Gordon. “They just know it has no teeth” and if your organization isn’t going to put forth resources towards improvement, neither will they.

On the flip side, rewarding good performing suppliers is equally important. While this reinforces the good things that good suppliers do, its benefits extend beyond just the current high performers.

“The suppliers that get recognized for performance or achievement in different areas are also good role models for other suppliers who say ‘Wow! Look what they got out of this. I want to do this, too,'” notes Gordon. “So, it’s not just the suppliers who are getting the awards that benefit from this, but it has a motivational aspect to it for other suppliers as well.”

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