Supplier Scorecard
Supplier Scorecard is a structured evaluation instrument that is employed by an organization to assess, track and review the performance of the suppliers. It is an important part of supply chain management because it gives formatted information to the performance of a supplier in a specified time.
The scorecard usually tracks multiple performance indicators such as item quality, adherence to delivery schedules, responsiveness in communication, and overall reliability.
Implementing a supplier scorecard is not only done to evaluate, but it also aims at providing accountability, transparency, and continuous improvement in supplier relationship. Through regular tracking, companies can know which suppliers perform well, the problems with the low performing ones, and can make better buying decisions.
Supplier Scorecard is usually prepared manually with each supplier and serves as a focal point to illustrate the reliability of the supplier in the event of long-term engagement by the procurement teams.
To access Supplier Scorecard in the system, follow this navigation path:
1. Prerequisites
Before creating and using a Supplier Scorecard, it is important to set up some essential masters in the system. These act as the foundation for meaningful evaluation. Without completing these prerequisites, the scorecard will not generate accurate or usable results.
The following must be created first:
Supplier: A supplier record should exist in the system with all relevant details, such as company name, contact information, and business details. Since the scorecard is linked to each supplier individually, the supplier master acts as the primary anchor for the scorecard.
Purchase Order: It is desirable to have a purchase order history of the supplier as it is the one that gives the system real data on the supplier deliveries, pricing and item information. Some of the scorecard criteria cannot be assessed adequately without purchase orders including the quality of the supplied goods or delivery timeliness.
1. How to create Supplier Scorecard
Creating a supplier scorecard involves a step-by-step process to ensure that the evaluation is set up correctly.
Navigate to the Supplier Scorecard list and click on New.
Select a Supplier to be scored. The scorecard is always tied to a single supplier, and this ensures that each supplier has their own individual evaluation record.
Choose the evaluation period—this could be weekly, monthly, or yearly. The period defines the time span over which supplier performance data will be aggregated and scored.
Set up the scoring function. This is the place where you determine the calculation of the scores using weighted scores and formula. Since the scoring setup varies according to the user, the setup is detailed in the next section.
Important Note: Individual suppliers possess a supplier scorecard that has been developed and the system does not allow the existence of a number of supplier scorecards. It will ensure data consistency and prevent face-to-face assessment or overlapping.
2. Features
2.1 Scoring Setup
The supplier scorecard consists of evaluation periods during which the performance of a supplier is assessed. The evaluation period could be weekly, monthly, or yearly, depending on the frequency and intensity of supplier interaction.
A score at the present indicates the score of a supplier over a number of evaluation periods. A weighting function is used to create these scores. The system uses a default formula of linear weighting to average scores based on the last 12 scoring periods. This formula is however entirely adjustable to match varying business needs.
For example:
A firm that has important suppliers can choose the increased weighted on the most recent periods to reflect the existing trends in performance.
It may be that other businesses will adopt a longer-term averaging method to iron out temporary changes.
This flexibility is to make sure that the scorecard is flexible to the various procurement strategies.
Supplier Standings
The supplier standing feature provides a quick way to categorize and sort suppliers based on their performance scores. Supplier standings are customizable, meaning businesses can define categories such as:
Preferred Supplier: For consistently high-performing suppliers.
Conditional Supplier: For suppliers with average performance, who may need closer monitoring.
Restricted Supplier: For suppliers with poor performance who should be avoided or reviewed before placing new orders.
These standings can also be integrated into the purchasing workflow. For example:
Suppliers with low standings may be automatically restricted from being included in Requests for Quotations (RFQs).
Suppliers with poor performance can be prevented from receiving Purchase Orders (POs).
This ensures that only reliable and high-quality suppliers are consistently engaged in procurement activities.
To view or manage supplier standings, expand a row in the Scoring Standings table by clicking the downward-facing arrow.
2.2 Criteria Setup
There are several criteria according to which the suppliers can be assessed, and the final score is a sum of these criteria. These criteria are based on all the areas of supplier performance that have been the most critical to the business.
Typical criteria are:
Response time of quotations: How fast does the supplier act to RFQ?
Delivered item quality: What percentage of supplied items meet the quality standards?
Timeliness of delivery: Do items arrive on time as per the agreed time frame?
The weight of each criterion will be specified and it will be necessary to ensure that the sum of all weights of criteria is 100. This is to make sure that the significance of each criterion is well reflected in the overall score.
To create a new criterion:
Such flexibility gives businesses the opportunity to establish evaluation metrics that are most suitable to the strategic objectives of the business.
2.3 Supplier Scorecard Variables
Each criterion is computed using variables (measurable data points of transactions with suppliers). These variables are run across the period of scoring to come up with meaningful performance indicators.
Examples of pre-defined variables include:
Total number of items received from the supplier
Total number of accepted items from the supplier
Total number of rejected items from the supplier
Total number of deliveries made by the supplier
Total purchase amount (in currency) received from the supplier
Variables are pre-set by default, but organizations can create custom variables through server-side customizations. For instance, a company might want to evaluate a supplier based on packaging quality or compliance with sustainability standards.
When creating custom variables, tick the Custom checkbox to indicate that the variable applies to a non-standard field.
The choice and definition of variables are critical because they directly impact the accuracy and fairness of the evaluation.
2.4 Evaluation Formulas
Using the chosen variables, scores of each criterion are determined with the help of the evaluation formula. The formula can be simple or highly complicated depending on what the business requires.
Formulas can include:
Basic arithmetic: Basic arithmetic This is a collection of arithmetic operations: addition, subtraction, multiplication and division.
Conditional functions: conditionals to deal with special cases.
Comparisons: less than (<), greater than (>).
Aggregate functions: min(x,y) and max(x,y) to establish limits.
For example:
{totalaccepteditems} / {totalreceiveditems}
{total_accepted_items} / {total_received_items}
This formula calculates the acceptance rate. However, in cases where no items were received, the formula would attempt to resolve to 0 / 0, which is invalid.
To prevent this, add a conditional check:
({total_accepted_items} / {total_received_items})
if {total_received_items} > 0
else 1
This ensures the formula always produces a valid result, avoiding system errors and maintaining evaluation integrity.
2.5 Evaluating the Supplier
When the criteria, variables, and formulas are established, that is when, the evaluation process can start.
The results are produced as an evaluation of every Supplier Scorecard Period by using the Generate Missing Scorecard Periods button.
The score of the supplier is currently shown as well as a visual performance graph, which shows how the supplier is performing with time.
Here, any warning or action taken against the supplier is also written. As an illustration, the system can send alerts when establishing RFQs/ POs in case the performance of the supplier has declined to a specific extent.
The constant analysis of suppliers does not only give a clear picture of the supplier performance, but also makes it easy to take corrective measures to reduce risks in time.