Supplier Performance
“How to Measure It, Communicate It and Improve it ”
September 13 th , 2011

4/15/2020
Page 2
-

Dan is a Sr. Buyer. Recently his department, ACME, experienced a change in management. A new Director has come on board and one of her first questions was related to Supplier Performance. In a nutshell, she wanted to know what ACME was doing to measure it, communicate it and improve it. Some recent high profile, missed deliveries have only added fuel to an already hot fire.
Dan’s Boss assigns him the task of creating an effective Supplier Performance Plan.
Dan decides that the first thing to do is to create a Supplier Scorecard. After all he thinks to himself…I can’t fix a problem until I know how bad it is…
What would be the primary metrics that Dan should report on his Supplier Scorecard?
4/15/2020
Page 3

Creating a Supplier Scorecard
•
•
•
•
•
•
Here are the Key Metrics which Dan used:
I. Quality Performance (35% of total score)
•
•
Supplier Quality on a PPM Basis
Certified Ship to Stock % (of all parts supplied by Supplier)
II. Delivery (25% of total score)
• On Time Delivery Performance per Measurement Period
III. Pricing (10% of total score)
IV. Cost Reductions (10% of total score)
•
•
•
V. Service (20% of total score)
• Communication
•
•
•
Capabilities
Reliability (honors commitments)
Inside Sales Support
Outside Sales Support
Engineering Support
Quality Support
VI. Continuous Improvement (additional points possible)
•
•
•
Certifications
Measurable Improvement over previous Scorecard
Participation in Six Sigma or LEAN Events
4/15/2020
Page 4

SUPPLIER NAME
I. Quality Score for Quarter
Current Score
Total Points f or Quality
II. Delivery Score for Quarter
Current Score
Total Points f or Quality
CURRENT QTR.
ACME Office Supplies Division
711 N. Elm
St. Louis, MO 63119
NOTES
<80
0
0
<80
0
0
81-85
1
0
81-85
1
0
86-90
2
0
86-90
2
0
91-95
3
0
91-95
3
0
95-98
4
0
95-98
4
0
100
5
0
100
5
0 0
0
Dan creates his scorecard and begins reviewing supplier performance data to fill out his first scorecard.
III. & IV. Price Support Score for Quarter
Supplier's Price Support in relation to Industry and Com petitors
0 1
(0 = Very Poor, 5 = Best in Class)
2 3 4 5
Current Score
Total Points f or Quality 0 0 0 0 0 0 0
V. Service Score for Quarter
Current Score
Total Points f or Quality
VI. Extra Credit
ACME PURCHASING REPRESENTATIVE
Supplier's Service Support in relation to Industry and Com petitors
(0 = Very Poor, 5 = Best in Class)
0 1 2 3 4 5
0 0 0 0 0 0 0
Supplier's may receive 1, 2, 3, 4, or 5 Extra Points f or Certif ications,
Outstanding Perf ormance in the Quarter, Improvement Over Previous Quarter,
Etc. at Purchasing's Discretion.
0
DATE Current QTR SCORE
0
4/15/2020
Page 5

ACME Office Supplies Division
711 N. Elm
St. Louis, MO 63119
SUPPLIER NAME
ABBY Works
I. Quality Score for Quarter
Current Score
Total Points f or Quality
II. Delivery Score for Quarter
Current Score
Total Points f or Quality
CURRENT QTR.
2011
<80
0
0
2nd QTR
81-85
1
0
NOTES
Qualit rejects on leaf springs up 25% this quarter.
86-90
2
91-95
3
3
95-98
4
100
5
0 21 0 0 21
Dan first scorecard goes out to Abby Works.
<80
0
0
81-85
1
0
86-90
2
0
91-95
3
0
95-98
4
4
20
100
5
0 20
Abby Works is a long-time supplier with some recent
III. & IV. Price Support Score for Quarter
Current Score
Total Points f or Quality
V. Service Score for Quarter
Current Score
Total Points f or Quality
VI. Extra Credit
0
0
1
0
(0 = Very Poor, 5 = Best in Class)
2 3
3
4
0 12 0
5
0 12 their quality score this quarter.
Supplier's Service Support in relation to Industry and Com petitors
0
0
1
0
(0 = Very Poor, 5 = Best in Class)
2 3
0 0
4
0
5
5
20 20
A final score of 73 is not very good…
Supplier's may receive 1, 2, 3, 4, or 5 Extra Points f or Certif ications,
Outstanding Perf ormance in the Quarter, Improvement Over Previous Quarter,
Etc. at Purchasing's Discretion.
0
73 ACME PURCHASING REPRESENTATIVE
Janice Hall
DATE
July 5th,
2011
Current QTR SCORE
4/15/2020
Page 6

After reviewing scorecards, with his boss, Dan realized that ACME really has some significant supplier performance issues. In fact, almost none of
ACME’s top suppliers scored above an 85. ON-Time Delivery and Quality
Scores were simply not high enough for the majority of their suppliers.
Clearly ACME’s expectations for performance were not being adequately communicated…
4/15/2020
Page 7

Dan decides to call one of his ISM colleagues to see what he should do to effectively communicate Supplier
Performance.
His friend recommends that Dan that establish a routine schedule for providing scorecards to the participating Suppliers and following that up with quarterly face to face reviews.
4/15/2020
Page 8

Dan decides that he needs to establish a routine Supplier Performance
Process in order to ensure that his Suppliers are actively engaged in meeting ACME’s expectations for Supplier Performance.
ACME Supplier Performance Process
• Purchasing will provide Supplier On-Time Delivery Data at the end of each month.
• Quality will provide PPM data at the end of each month.
• This data would be summed each quarter and provided to the respective suppliers in a Quarterly Scorecard, which
Purchasing will submit.
• Individual Buyers will also be responsible for managing the subjective elements of the scorecard for their specific
Suppliers.
• Any Supplier with a score below 85 would be required to attend a face to face meeting at ACME to create an improvement plan to improve the scores in whichever area was deficient. And this improvement or lack thereof would be documented in the Supplier’s next Quarterly Scorecard.
4/15/2020
Page 9

At this point, Dan has effectively measured and communicated ACME’s critical Supplier
Performance Metrics…but a quick check of his email shows some critical missed deliveries and ongoing quality problems.
Simply documenting and communicating requirements was not necessarily go to ensure compliance…frustrated Dan wondered what tools or actions he could take that would ensure Supplier’s were meeting the required performance metrics.
4/15/2020
Page 10

●
 1. Working together with ACME’s other departments, Dan creates a Supplier Partnership
Manual which clearly documents all the required performance activities and metrics for servicing ACME.
 2. Dan creates a Supplier Continuous Improvement Progress (CIMP) form, which is provided quarterly to suppliers in addition to their Scorecard. This CIMP records all deficient performance metrics and documents on a quarterly basis the Supplier’s actions to improve, correct or eliminate the root cause of their deficiencies. It is a living document that is referred to throughout the year and at all face to face meetings to ensure Supplier Performance
Improvement.
 3. Value Analysis Study – Dan decides to conduct and utilize Value Analysis Studies of key components purchased from his key Suppliers to determine areas for cost, quality and performance improvements with ideas generated by these same Suppliers.
4/15/2020
Page 11

ACME’s Supplier Partnership Manual contains the following :
•
Quality Requirements
• Delivery Performance Requirements
•
An Explanation and Example of the Supplier Scorecard Process
• Cost Reduction Expectations
• Process Improvement Expectations
•
Communication Requirements
• Accounting Requirements
•
Credit Application Information
• Billing and Shipping Addresses for all Locations
• Key Contact Information for all Locations
•
Shipping and Packaging Requirements
• Transportation Routing Instructions/Bulletins
•
Intellectual Property Protection/Non-Disclosure Agreement Requirements
4/15/2020
Page 12

Supplier Continuous Improvement Progress (CIMP) page 1
4/15/2020
Page 13

Supplier Continuous Improvement Progress (CIMP) page 2
4/15/2020
Page 14

SUPPLIER CHECKLIST FOR VALUE ANALYSIS STUDY
Part# and Description:
Current Manufacturer:
Manufacturer Part#:
Estimated Annual Usage:
Class Code:
Buyer Code:
QUESTIONS
Could Costs be reduced by relaxing Tolerances?
Could Costs be reduced by relaxing Finishes?
Could Costs be reduced by relaxing Testing?
Could Costs be reduced by material changes?
Could Costs be reduced by volumes purchased?
Could Costs be reduced by different mfg. Processes?
Can the part be simplified?
Is there a similar part in form, fit, and function that is more cost effective?
Are any of the current specifications creating additional cost burden?
Other Suggestions?
Supplier:
Address:
Signature:
YES
4/15/2020
Page 15
NO
Date:
Title:
Buyer:
Date Submitted:
RECOMMENDATIONS

Over the course of the next year, Dan was able to accurately measure
Supplier Performance and communicate it to his respective Suppliers.
Managing improved performance proved to be more difficult, but he discovered that maintaining a continuous improvement process with each
Supplier generated huge benefits in terms of improved Supplier
Performance, much to the satisfaction of Dan’s Boss and to Dan’s relief…
4/15/2020
Page 16