The Importance of the Supplier Performance Scorecard

Posted on 01/03/2014 by Tim Carey

In an intensely competitive environment which requires the appropriate potential for improvement to be unlocked in a structured fashion, efficient, effective supplier evaluation is becoming a basic success factor in retailing.

It is a type of supplier evaluation which embraces the crucial elements of success, ranging from quality of supply through maintenance of service-level right to the necessity for electronic data transmission, a type of evaluation which displays these elements clearly for all involved and shows up areas of weakness promptly and consistently. Here, one of the fundamental challenges lies in consolidating the available data. The data is often distributed in various places throughout the company and is scarcely used unless as the result of considerable effort. The purpose of this report is to demonstrate possibilities for showing increased transparency and efficient performance evaluation for the benefit of trade and industry.

Supplier evaluation via Supplier Performance Scorecard

A scorecard is recommended for supplier performance evaluation. Based on a scorecard, the success-relevant characteristic values may be analyzed in a user-friendly way and used in day-to-day business. The basic characteristic of a supplier scorecard should be a nearly complete depiction of the service performed. This may contain both quantitative (e.g. order fill accuracy) and qualitative aspects (e.g. the ability to cooperate).

Time-saving exception management

Through the use of a scorecard, supplier performance can be shown in its entirety. Retail companies that usually have several thousand suppliers, produce an abundance of information. When a scorecard is introduced, one of the challenges is to use this information in a time-saving, focused way. After it is implemented, the result should affect not only the annual planning meeting but also day-to-day business. For this to be possible, it is necessary to aim at updating some areas on a daily basis leading to the timely detection of issues, for instance for service levels. Considerable benefits may be derived from time-saving exception management. Only an automatic exception management can recognize outliers and provides the necessary information to the user immediately. This exception management is controlled on the basis of thresholds which make it possible to use the scorecard in a meaningful way.

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