8.1 The Supplier Scorecard

A scorecard is not a report card; it is a feedback control loop. Without objective performance data, supplier management devolves into emotional arguments and "he said, she said" debates. Bad suppliers thrive in ambiguity. You must quantify their impact on your operation to force improvement or justify their removal. The scorecard changes the dynamic from "Procurement is complaining" to " The data shows a process failure."

The 5 Core Metrics (The Behavior Drivers)

Measure what matters to the engineering and production outcome. Do not track "soft" metrics like "friendliness."

1. On-Time Delivery (OTD)

• Definition: Percentage of line items received within the delivery window (e.g., -2 / +0 days) of the Committed Date.
• Logic: A part arriving early takes up cash and space; a part arriving late stops the line. Precision is the only acceptable state.
• The Trap: Do not measure against the Requested Date alone, or you measure lead time, not reliability. Measure against the Commit.

2. Quality (DPPM & Escapes)

• Definition: Defective Parts Per Million and absolute count of Quality Escapes (RMA events).
• Logic: One escape can ground a fleet or stop a launch.
• Weighting: This is a "kill switch" metric. High OTD is irrelevant if the parts do not work.

3. Commercial Discipline

• Definition: Adherence to quoted terms.
• Violation Triggers:
  • Price change after PO issuance.
  • "Surprise" MOQ increases.
  • Invoicing errors (price mismatch).
  • Breaking NCNR agreements during cancellations.

4. Responsiveness (The "Speed of Trust")

• Definition: Average time to Acknowledge (ACK) a PO or respond to an RFQ.
• Standard: ACK within 24–48 hours.
• Logic: A PO sitting unacknowledged for 5 days is a "silent failure" risk. You assume it is booked; they haven't even seen it.

5. Lead Time Delta

• Definition: The gap between Quoted Lead Time and Actual Lead Time.
• Logic: Penalizes suppliers who quote 12 weeks to win the business but consistently ship in 18.

Cadence & Data Ownership

The most common failure mode for scorecards is the "Data Debate," where the supplier spends the entire meeting arguing about the validity of the numbers.

The "No Debate" Data Rule

1. Source of Truth: Your ERP/MRP system constitutes the legal record of receipt and quality.
2. Dispute Window: Send raw data to the supplier on the 5th of the month. They have 5 business days to challenge a specific line item with evidence (e.g., POD showing delivery was actually on time).
3. Lock: On the 10th, the data locks. No retrospective changes allowed during the Quarterly Business Review (QBR).

Cadence

• Calculation: Monthly.
• Review: Quarterly (QBR) for A/B suppliers; Semi-annually for C suppliers.

The Dashboard & Tiering System

Output a single weighted score (0–100) to categorize every supplier. This dictates their future with your company.

Metric	Weight	Target
Quality	40%	0 Escapes / < 500 DPPM
OTD	30%	≥ 98%
Responsiveness	15%	ACK < 24 Hours
Commercial	15%	0 Variance

Tiering Logic

1. Preferred Supplier (Score > 90)

• Privileges: First look at new designs (NPI), Vendor Managed Inventory (VMI) eligibility, Payment Term improvements (e.g., Net 30 → Net 45).
• Action: actively consolidate spend here.

2. Approved Supplier (Score 70 – 89)

• Status: Standard business. Monitor closely.
• Action: Requires Corrective Action Plan (CAP) for any specific metric below threshold.

3. Conditional / Probation (Score < 70)

• Status: New Business Hold. No new RFQs or part numbers awarded.
• Action: Immediate "Get Well" plan. If score remains < 70 for two consecutive quarters, initiate desourcing/resourcing to a competitor.

Pro-Tip: Use the "Conditional" status as leverage. When a sales rep asks for a meeting to show a new product, refuse: "You are on Conditional status due to OTD. Fix the delivery of the current parts, then we can talk about new ones."

Final Checklist

Parameter	Standard / Rule	Critical Value / Limit
OTD Window	-2 Days / +0 Days	Late = Fail, Too Early = Fail
Data Source	ERP Receipt Date	Not "Ship Date" (Incoterms matter)
Dispute Period	5 Days	After 5 days, data is fact
Review Cadence	Quarterly (QBR)	Minimum frequency for key suppliers
Probation Trigger	Score < 70	Automatic "New Business Hold"
Quality Weight	Highest (30-40%)	Bad parts are worse than late parts
Soft Metrics	Forbidden	No "Ease of doing business" scores