Effective Supplier Scorecards Rely on Identifying Key Metrics, Data, Inputs

A supplier scorecard is a tool to help you and your suppliers get better, together.

Each company will track and measure different data and metrics based on what they need to get out of a scorecard. To get started, you establish elements to watch, decide how you will weight each one, create performance targets for each, form scoring criteria and sum it all up with triggers and thresholds that will show you when it’s time for a reaction. Finally—and of utmost importance—you study the findings and share the results with your suppliers on a regular basis.

The right metrics for your scorecard can include elements of quality, delivery, cost vs. value, supplier responsiveness, process capability, measures of process management (SCARs, deviations, nonconforming events), and can yield actionable information. It’s not enough to collect data and see what the numbers are—you have to do something with it.

Eduard Toerek and Reinhold Toerek of QUARA Innovations spoke on supplier scorecards at OMTEC 2018. Afterward, I sent them a number of questions to get a little clearer on what I’d heard. (See their entire slide presentation here.) I found their answers to be helpful, and thought that you would, too.

What have you found to be your customers’ main challenge when approaching scorecards?

One of the main challenges is for leadership to truly understand the need for, and benefits of, a comprehensive supplier scorecard. Others include selecting the right metrics for the scorecard, and selecting the right inputs to measure. And also, there are a number of challenges with initiating and maintaining scorecards.

What else have you seen?

From our experience, a significant challenge is data integrity. All too often data that has not been proven is used in metrics. Understanding the source of the data, data collection systems and ensuring that data is reliable and trustworthy is often difficult. Use of uncertain data can lead to inappropriate decisions and responses.

Also, controlling data sources needed for the scorecard. When using an application such as Excel, the data files need to come from a variety of sources such as the ERP system, Receiving, Inspection, Non-conforming, etc. Setting up systems to feed data to the scorecard and ensuring that format of the source and this connection is not broken is common.

Getting well-defined metrics communicated to the supplier can be a challenge. For example, with on-time delivery: the clock stop from the supplier’s perspective vs. the OEM’s perspective.

Lack of communication with your suppliers is a common issue. There must be open and regular communication with suppliers, sharing their scorecards on a regular basis. If they are surprised by some of the ratings, this should prompt them to ask why. Scorecards in themselves only provide insight into problems; they can’t fix them. We fix the problems by building relationships with our suppliers and working together to find solutions.

What do you recommend to make and maintain an effective scorecard/evaluation system? Excel? Are there programs or software that do a better job? Would these get looked at in an audit?

Excel is an excellent tool that accommodates this activity for several reasons: it’s relatively easy to create, everyone has Excel and it has the ability to import data.

There is software created for controls such as this; however, it does become costly and often difficult to establish, as it will likely be integrated with the ERP system. Any changes that need to be made later become increasingly difficult as the systems become more complex.

Solutions integrated into an ERP have an advantage when it comes to data that already resides in the system, such as purchase orders, receipts, etc. However, it gets more difficult when including subjective metrics in the scorecard, such as “Supplier Relationship.” In this case, the ERP system may be better used as an input source to the scorecard as opposed to an integrated scorecard.

On the Notified Body/FDA audit question: software validation is increasingly coming into focus. If the tools are used to make quality decisions, they become likely candidates for scrutiny.

Data integrity and statistical techniques (such as sampling) are also increasingly being brought to the forefront. This ties directly into scorecard data.

Are there common themes to what is uncovered in use of the scorecard? Or are the discoveries as varied as the companies themselves?

Perhaps the most eye-opening is the discovery of an OEM’s own flaws and how their behaviors impact their suppliers. Effective supplier scorecards often bring a company’s own shortcomings to light. Supplier performance is heavily influenced and dependent upon the relationship and interaction between the supplier and OEM. If the OEM’s internal shortcomings are not identified and addressed, simply shopping around for a new supplier likely won’t help much. Being open about your own issues and being willing to have open and honest conversations internally, as well as with suppliers, is the best and quickest way to continuous improvement.

Who is the best kind of person to manage a scorecard? What traits and skills does s/he have? Conversely…who’s the wrong person?

The best person is likely to be in the supplier quality organization. This person works closely with all of the suppliers and really is the link between suppliers and the OEM. Skills and traits include:

  • Part knowledge
  • Process knowledge
  • Manufacturing knowledge
  • Inspection knowledge
  • Detail oriented
  • Open and honest communicator
  • Relationship builder

The wrong person is one who is not intimately connected with the process and is concerned with only one aspect of the business. A simple example would be one who is only interested in part cost, irrespective of the other factors that make a good supplier. Managing suppliers really requires input from multiple functional working groups within the organization.

Do you have next-level advice on weighting the various metrics? Do you feel that most people “get” how to assign weights on their own?

Applying weighting factors is really dependent upon the goals and objectives of the organization. The items on the scorecards should be the things that contribute to the goals of the organization. The weighting needs to align these factors in proper precedential order. As more scorecard elements are added, the indicated actions based on the scores are affected by the weighting factors. From our perspective and observations seen in industry, this concept of “weighting” is somewhat challenging. The big advantage, though, is that it facilitates the use of many elements, giving a much more complete picture of your suppliers’ performance.

How much time is typically invested in tracking data, analyzing the details and taking action? (I am assuming that it could be a full-time job, but it’s likely one of many roles for a single person, right?)

The amount of time needed to implement and maintain scorecards depends on the availability and integrity of the data already available. If data is available (and we are confident that it is trustworthy and timely), then this data can be fed into the scorecard relatively easily. If data systems are not in place (or lack integrity), then the time to obtain the information to feed a scorecard is significantly higher. The more elements added to the scorecard increases the time to populate it, especially in particularly heavy manual systems.

A process owner should be established to ensure that the scorecards are updated properly and in a timely fashion (but likely would not be making these updates him/herself). However, developing and maintaining a supplier scorecard really is a team effort. The output of a scorecard drives decisions that will impact many areas of the company, such as R&D, quality, sourcing, purchasing, receiving, warehouse, customers, etc. It only makes sense to include these people in the development of the metrics in the first place, to ensure that we are collecting and measuring the right things, and that the proper weighting factors are applied.

Eduard Toerek is President of QUARA Innovations and has over 30 years of quality and regulatory experience in medical device and life sciences industries, including roles at Picker International, Marconi Medical Systems and as Global Q&R Director at Philips Healthcare. Mr. Toerek has also served in numerous industry relations roles, including Vice-Chair of the NEMA/MITA CT Group (where he co-authored industry standards adopted by FDA), COCIR representative and member of the U.S. Access Board Advisory Panel. He represents firms globally with regulatory compliance issues, trains their Q&R professionals, manages Q&R implications of corporate mergers and acquisitions and assists them in preparation for FDA inspections, Notified Body audits and European Medicines Agency (EMA) GMP inspections.

Reinhold Toerek is Vice President of QUARA Innovations, where he applies his Six Sigma Black Belt certification and training to work with clients in the medical device and life sciences industries to manage their quality system improvement, process improvement and supplier quality management issues. Prior to QUARA, Mr. Toerek held positions at Ford Motor Company, National City Bank, OrthoHelix Surgical Designs, Tornier and Wright Medical in manufacturing and quality.

To request a Supplier Scorecard Checklist from QUARA Innovations, send an email with the subject “Scorecard Checklist.”