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Supplier Scorecarding: What it Means for Your Business

Denis Storey
August 20, 2018

Supplier Compliance: Drive supplier performance with automatic scorecarding based on critical attributes.

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Leverage Data to Drive Supplier Performance and Increase ROI

Supplier Compliance operates as a virtual early warning system, automatically identifying issues with incoming shipments before they enter production, reducing out-of-spec inventory. Businesses can connect downstream issues such as customer complaints and plant floor problems to specific supplier lot shipments, enabling supplier chargebacks, scorecarding, and rapid replacement.

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Supplier scorecarding provides valuable insight into the quality and reliability of a supplier and their products. Rating and ranking suppliers based on business-critical key performance indicators (KPIs) allows food manufacturers to understand how individual suppliers affect the company’s product quality, risk, compliance, customer satisfaction, and overall business performance.  

“Although price and delivery time metrics appeal to professionals in purchasing and accounting, folks in quality, regulatory, safety, and R&D have little actionable data to monitor or scorecard suppliers on the KPIs that matter to them,” TraceGains CEO Gary Nowacki explains.

For example, on-time and price performance is essential, but what about a supplier who bogs down a GFSI audit? Or one that doesn’t submit, and refreshes, documents required by FSMA? If a supplier has multiple violations of improperly sealed trucks, can you be at risk? If a supplier shipment makes it to the plant floor before you find contamination or damage, forcing you to scrap an entire production lot, what’s the total cost of that unpleasant surprise? What about a supplier who ships a lot that misses key attribute targets, such as granulation or protein, causing quality or customer complaint issues?

“Scorecarding based solely on price and delivery is a bit like sending out grade school report cards with marks for only attendance and tardiness,” Nowacki added.

When used effectively, however, scorecarding can result in a tremendous benefit for both the manufacturer and supplier.

Elements of a Supplier Scorecard

The elements of a supplier scorecard vary based on the manufacturer’s business rules, type of product handled, etc.; however, there are some common threads that all scorecards include: 

  • Ship quantity vs. order quantity. Can the supplier be counted on to deliver inventory in the amounts requested? Is the shipment over or under? How often do variances occur? 

  • Lead time vs. delivery time. Is there a variance between quoted lead time and actual delivery? Is the inventory ahead of schedule, right on time, or late? How do these variances affect your production schedule and overhead costs? How often do they occur? 

  • Documentation accuracy. Accuracy on documents results in better product and consistency, but it also ensures that information is readily available and accurate during an audit. Are reports from suppliers complete and inclusive of all attributes and factors agreed upon? How often do suppliers need to be “managed” concerning proper documentation? 

  • Price variations. Does the inventory price on the delivery invoice match that of the quoted price during ordering? Is the variance justified (e.g., last-minute request of additional inventory)? 

  • Product defects. Although some product defects are typical, manufacturers should keep them to a minimum. Is the inventory from a supplier consistently riddled with mistakes? What corrective action is needed? How does this affect production time and overall revenue? 

  • Ensuring product quality and productivity is an essential component of every food manufacturer/processor’s business. The effects of poor delivery, quality, documentation, etc., can be felt throughout the product’s lifecycle, ending with the consumer and his or her satisfaction (or lack thereof) of the product itself.

Scorecarding for Quality and Purchasing

Scorecards allow food manufacturers to identify, qualify, monitor, and reward suppliers based on pre-determined factors (included on the scorecard). Depending on the company, scorecarding can be handled manually or using an automated solution. The manual process introduces risk because of the inherent fallibility that humans are subject to – mistakes happen, we’re only human. 

Conversely, an automated system such as TraceGains digitizes all of the documentation associated with an inventory shipment and produces actionable items, including scorecards. This process minimizes the risk introduced from inputting data incorrectly (human error) and provides an early warning system for companies.

How? TraceGains doesn’t merely store documents; it extracts the meaningful data and compares it with pre-specified business rules. This automation allows staff members to be proactive in addressing issues rather than reactive.

Additionally, by scoring suppliers, quality and purchasing staff members can monitor consistent issues with individual suppliers. For example, “XYZ” supplier might be consistently late with deliveries by a few days. It has displayed a high level of product defects that have resulted in corrective action to replace damaged or out-of-spec inventory. Both of these issues delayed production and go-to-market capabilities. Fortunately, with the help of a scorecard, the quality team monitored the trends with “XYZ” supplier. It moved to a different supplier with a better rating, thereby returning it to normal productivity levels. 

Both parties Supplier effectiveness can be reviewed by – food manufacturer receiving inventory and the supplier itself. By sharing the scores with the supplier, food manufacturers can facilitate continuous quality improvement. This process fosters accountability and overall gains in product and performance.

Scorecarding for Product Development

Developing a new product presents many challenges, from creating a winning formula to selecting the right suppliers and establishing a go-to-market strategy. With the help of a scorecard, however, the process of choosing appropriate suppliers doesn’t have to be so challenging. Research and development (R&D) staff members can see which suppliers deliver a consistent product on time and on spec, and they’ll see the flip side of that coin and rule out suppliers who haven’t shown consistency or quality.

Scorecarding for Improved Efficiencies

Food manufacturers and suppliers can experience greater transparency and improved efficiencies through the use of scorecards.

According to Illes Food Ingredients Ltd., one TraceGains customer, “The efficiencies we’ve gained are reviewing all the data we receive regularly. We’ve also been able to identify areas of improvement in dealing with some vendors that we might not have recognized until an issue occurred. It also allows us an easier means of establishing and maintaining our ingredient standards to compare them between the standards of various vendors for the same ingredient.”

Supplier Compliance evaluates supplier product performance, lot by lot, from purchase order to production, extending inventory visibility to the shipping dock. Users can scorecard suppliers based on critical attributes such as continuous compliance with ingredient specifications and more. Want to learn more? Read more about Supplier Compliance here.

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