What is the process for creating a vendor performance scorecard?

1 Define objectives

The first step is to define the objectives of your vendor performance scorecard. What are you trying to achieve by evaluating your suppliers? How will you use the scorecard to make decisions and take actions? You should align your objectives with your organizational strategy, your customer needs, and your vendor contract terms. You should also communicate your objectives to your suppliers and get their feedback and buy-in.

2 Select metrics

The second step is to select the metrics that will measure your vendor performance. Metrics are the quantitative or qualitative indicators that show how well your suppliers are meeting your objectives. You should choose metrics that are relevant, measurable, achievable, realistic, and time-bound. You should also consider the balance and diversity of your metrics, covering aspects such as quality, cost, delivery, innovation, and risk.

3 Set targets

The third step is to set the targets that will define the desired level of performance for each metric. Targets are the specific and measurable goals that you and your suppliers agree to achieve within a certain period. You should set targets that are challenging but realistic, based on historical data, benchmarks, and best practices. You should also involve your suppliers in setting the targets and ensure they understand the criteria and expectations.

4 Collect data

The fourth step is to collect the data that will feed your vendor performance scorecard. Data is the factual and verifiable information that shows the actual performance of your suppliers against the metrics and targets. You should collect data from reliable and consistent sources, such as invoices, reports, surveys, audits, or inspections. You should also establish a clear and regular process for data collection, validation, and analysis.

5 Calculate scores

The fifth step is to calculate the scores that will summarize and compare your vendor performance. Scores are the numerical or graphical representations that show the degree of achievement or deviation from the targets for each metric. You should use a standard and transparent method for scoring, such as percentages, ratings, or rankings. You should also weight your metrics according to their importance and impact.

6 Review and improve

The sixth step is to review and improve your vendor performance scorecard. Reviewing is the process of examining and interpreting the scores, identifying the gaps and trends, and evaluating the strengths and weaknesses of your suppliers. Improving is the process of taking corrective or preventive actions, providing feedback and recognition, and revising the objectives, metrics, targets, or scores if needed. You should review and improve your scorecard regularly and collaboratively with your suppliers.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?