Today’s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing. Mark
Last week we took a look at the life of your purchased products once you have the contract signed and begin to place orders and how you can protect that inventory along the supply chain. Today we take a look at the job your suppliers are doing while the contract is being executed. What is the quality of their goods; timeliness of the shipments; pricing being billed versus the contract? Are you getting “tricked” or “treated” by your suppliers?
Many retailers have looked at the process of developing supplier scorecards that measure how well their vendors are doing in the relationship with them. If designed and executed well, these scorecards can be invaluable in later stages of negotiating new contracts or in evaluating new vendors against a standard you are used to receiving. Let’s look at a few of the metrics to consider when creating a good supplier scorecard.
Invoice audits – Many companies work so hard to get a great deal, great prices; finish with a contract that works well for the company only to move forward without well-defined processes for auditing the new invoices to ensure the new pricing is being affected by the vendor. One of the most important pieces of creating a good evaluation program for your vendors will be to determine how often and which invoices you are going to audit and then stick to that audit schedule. The bigger your company the more important this will be.
Quality Control – Scoring the suppliers on quality comes in a few different forms. The first thing to measure is the quality of the product itself: Are you getting the product you contracted and does it meet the specifications that were agreed upon? Another area is in the packaging of the product when it arrives. Many times it is how the product was packaged to ship that is the problem and frequently responsible for big losses. How the items measure up to their warranty will also be another critical area to measure for quality.
Delivery–Even the best product at the best prices has value only if you can get the product in the timeframe that your company needs it. Vendors should be measured on their ability to deliver within the window agreed upon in the contract but they should also be measured on how capable they are in delivering unscheduled product in emergency situations. As in any business, circumstances occur that take you outside of the normal schedules and you need partners who can deliver when you need them most.
Service–This leads us to final scoring point for this blog; services. Delivering unscheduled product within a window of time you need it is one thing but how your suppliers handle the relationship with you business in times of conflict or when issues arise is equally important. Scoring this area can be slightly more subjective, however developing a strategy by which you can record these bumps in the road and how your suppliers react to them will be valuable in future negotiations.
For more information on scoring your suppliers or for assistance in reviewing or creating automated scorecards, please contact a SafeSourcing Customer Service Representative.
We look forward to your comments.