Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Metrics That You Should Include in Your Scorecards

Here are some of the metrics that you need to include in your scorecards to evaluate your suppliers effectively:

1. Pricing Performance

Pricing is an important point when choosing a supplier. Tracking this metric will help you identify the most efficient supplier. Here are some price-related metrics that you can track:

• Price competitiveness
• Price stability
• Accuracy of invoice to purchase orders
• The duration of the billing process

2. Delivery Performance

The quality of goods upon delivery and compliance with industry standards, as well as the timeliness of implementing SaaS platforms, are important factors to consider when evaluating vendor performance. Here are the other delivery performance-related measures that you can include:

• Fulfillment rates of contract terms
• Number of on-time deliveries
• The efficiency of the supplier’s delivery process

3. Product Quality

While pricing is an important factor to consider when selecting a vendor, equal attention should be given to the quality of their products. 

One way to evaluate a SaaS vendor’s quality is by comparing their paid service to their free trial. Additionally, it is essential to determine if their products are innovative and aligned with your industry’s needs.

4. Service Efficiency

Having a vendor that is responsive to customer complaints and issues is crucial. There are several metrics you can use to measure the efficiency of your vendor’s customer service:

• Average time to respond to complaints
• The rate of dispute resolution
• Quality of communication
• Commitment to incorporate feedback
• Number of channels for customer complaints

5. Compliance Metrics

The metrics that you need to track for compliance will vary based on your specific industry. Nevertheless, some include the following:

• Documentation standards
• Adherence to national and local regulations
• Sustainability documentation

Steps to Create Your Own Scorecard

Curious about making your own scorecard? Don’t worry, we got you covered!

1. Collect documents

To start your evaluation process, you must first collect your original RFP discovery documents, the vendor’s RFP response, and the contract. Make use of the research that was conducted for these documents to guide your evaluation. 

If you used a weighted scoring system in your RFP, analyze which factors were assigned the highest weight. 

Next, check the contract to identify any service level agreements (SLAs) that may have been established. Keep a record of these SLAs as you come across them.

2. Know your priorities and determine performance categories

With the list of items you have gathered, assess which ones are crucial for the success of your project. 

To determine this, ask yourself questions such as whether poor performance in a specific area would lead to problems and whether it would affect the overall business. 

Additionally, consider if any processes could minimize these risks. Once you have answered these questions, categorize the most significant factors and group them together. 

3. Apply grading scale

After identifying the factors you will evaluate, the next step is to determine how to grade them. If you’re new to vendor evaluations, you may opt for “yes or no” questions such as whether the deliveries were on time, accurate, or of acceptable quality.

However, some questions may require a more nuanced approach. For example, evaluating whether the vendor interactions were professional and courteous might require a rating scale from one to five to accurately reflect the relationship.

Regardless of the scoring method you choose, it’s crucial to establish clear criteria for what qualifies as a good score and what would result in a poor score. 

This ensures that all evaluators use the same standards when rating their interactions with the vendors.

Benefits of Scorecards in Vendor Management

Here are some of the benefits that you can gain by using scorecards:

1. Mitigate supplier risks

Vendor risk management can benefit from balanced scorecards as they provide valuable insights into a vendor’s performance. 

With a scorecard, you can monitor various KPIs to evaluate their efficiency and assess the risks associated with their actions. 

This is particularly relevant in today’s business environment where companies are increasingly dependent on multiple SaaS software vendors.

2. Removes biases

Data-driven vendor scorecards eliminate biases and provide performance scores. With a data-driven approach, every decision made in vendor management is supported. 

Thus, enhancing transparency and preventing biases from affecting the vendor lifecycle. This approach ultimately leads to better ROI from vendors.

3. Better negotiations

Unclear contract negotiations may damage relationships as both parties have to defend their claims and disprove the others’.

A vendor scorecard based on objective data can help you structure the conversation and clarify your perspective to the vendor. This can help to remove any emotional biases from negotiations and enable both parties to find mutually beneficial solutions.

As a result, negotiations become more transparent, and the vendor relationship becomes stronger, even if the negotiations are complex.

Conclusion

Vendor scorecards serve as invaluable tools in vendor management, providing businesses with a systematic approach to evaluating and monitoring supplier performance. This article delves into the essence of vendor scorecards, elucidating their purpose, the metrics they encompass, steps to create them, and the significant benefits they offer in the realm of vendor management.