Category Archives: Small Business Resources

21 Vendor Metrics Your Supplier Scorecard Might be Missing


Giving your vendors feedback through a supplier scorecard is one of the best ways to improve their performance. When you take factors beyond price into consideration, your total cost of ownership decreases, your customers are happier, and you improve relationships along your entire supply chain.

But is your scorecard missing key metrics?

The goal of a supplier scorecard is to measure things that are important to you and your customer. By measuring and keeping score, you can encourage your suppliers to improve.

If you don’t have a supplier scorecard system yet, then check out my guide on Building an Awesome Vendor Scorecard Program in 4 Easy Steps. It includes a free Excel template that you can modify to match exactly what metrics you want to measure.

While some of these metrics might not apply to your business model, there’s definitely a few to add if they measure something important to you and your customers.

  1. Communication

Whether it’s email response time, conversation clarity, or even language skills, bad communication can be a huge drain on a relationship. Ask everyone who interacts with the supplier to rank communication on a ten-point scale and average the scores. Give specific feedback to your supplier on which aspect of communication would most improve the score: Do their emails need to provide more details? Should they look into hiring some translation help? Could they email less often?

  1. Lead Times

Keep a running average of the lead times from order to receipt for each supplier. Compare against other suppliers or a standard you’re working to reach. Be sure not to penalize or reward suppliers based on your choice of shipping method. Overall lead times will of course go down if you start using express shipping. However, if the supplier chooses the shipping method, then including it might be a good idea.

  1. Payment Terms

How long your supplier gives you interest-free loans can be very important, especially when cash is tight. Letting suppliers know what the ideal would be, or the most generous terms you have from another supplier could encourage them to upgrade your credit.

  1. Missed Shipments

Dropping the ball on an order or stocking out can have big consequences to you and your customers. Measuring rare but high-impact failures helps both you and your vendor work on ways to avoid future problems.

  1. Financial Health

Walmart periodically checks in on the Dun & Bradstreet credit scores of its suppliers. A supplier in poor financial health could disrupt your supply chain by entering bankruptcy. Measuring this can sometimes be tricky – but it may justify the extra effort.

  1. Number of Other Customers

Similar to financial health, a diversified customer based is a sign of supplier strength. Walmart hopes its suppliers have other customers besides Walmart. In fact, many big-box retailers are uncomfortable being more than 30% of a supplier’s revenue base. On the flip side, you may not want some suppliers serving other customers.

  1. Ease of Doing Business

Similar to communication, some suppliers are just easier to deal with. Being difficult can take up your team’s precious time, and those suppliers could benefit from knowing that they are a hassle. Of course, you’ll want to be courteous and professional with your feedback, but being open and honest with this metric can go a long way to solving problems between you.

  1. Audit Standards

Many large companies such as Disney and Target have audits that every party in the supply chain must pass. Even if you don’t work with these companies, holding your suppliers to these standards can be a good idea. It usually involves bans on child or forced labor, a maximum of 60-hour workweeks, and basic safety standards. Putting this metric on your scorecard can show your vendors how important those standards are to you.

  1. Cost Reduction Suggestions

The best vendors I’ve worked with have come to me with ideas on how to reduce costs. For example, if we tweaked a part slightly, then the supplier could offer me a lower price. I want to encourage this behavior, so my suppliers get a scorecard bonus when they make a plausible suggestion.
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  1. Product Suggestions

I constantly worked with my suppliers to come up with great new products my customers wanted. Most of them pushed products at me, but only a handful of vendors presented good ideas. The difference was that those vendors spent time researching end users and gathered insights they could pass along to me. In your scorecard, you can rate the quality of product ideas (can you take what they offer and sell it to your customer right away), or the quantity ideas if they’re shy about presenting options to you.

  1. Relative Price

Price likely factors heavily into your decision, but do your vendors know where they stand compared to others. While you may not want to tell any of your vendors, “you’re our cheapest option,” because they might raise prices, you may want everyone else knowing they’re more expensive. A qualitative gauge similar to, “you are more expensive than average on most products,” can help more expensive suppliers know where they stand and encourage them to quote lower prices in the future.

  1. Specific Quality Metrics

Most vendor scorecards have “Quality” as a category, but do you have specific subcategories? What exactly are you looking for? Here are some possible options:

  • Color
  • Size
  • Error-free
  • Performance
  • Runtime
  • Neatness

Identifying exactly what your customer is considering as she evaluates the product’s quality will help you decide exactly what specific quality metrics to include.

  1. Capacity

When demand is high, does your supplier have the capacity to fill your orders? Letting vendors know where they stand in their ability to fulfill your peak ordering could encourage them to make more investment and increase capacity.

  1. Minimum Order Quantities (MOQs)

On the other side, do vendors make you order more than you really need. If so, let them know. Most of my vendors wouldn’t budge on letting me order less than 2,000 units until I made the ‘A’ score under 500.

  1. Signed and Following Manufacturing Agreement

This is usually a yes-no metric, but it rewards them for abiding by the terms of our agreement. Without including this on the scorecard, some vendors forget you ever signed anything – especially after staff turnover.

  1. Transportation Time and Cost

A freight forwarder really impressed me when they set up a meeting to review a scorecard they built for me – which graded them. It showed the average time it took them to deliver containers and other data points 0—0-[telling me how they were doing. Most interesting was that it showed they weren’t perfect – but that they were trying. Consider tracking similar metrics with logistics providers.

  1. In-stock Percentage

This one may be more unusual, but it’s the key metric of retailers. Essentially, the supplier is responsible for how often its products are in stock for its customer. For me as a supplier to Walmart, it measured how often my products were on shelves. If I saw it was below their target, then it was my responsibility to talk with them and come up with a solution. If your supplier has a similar responsibility to keep you in stock, or they provide products on consignment, then consider letting them know how they’re doing and ask them to step in when it’s below standard.

  1. Your Sell-through, Sales, and Margin on Their Product

Similar to above, if your suppliers have a stake in your sales, then let them know how sales are doing. Be sure not to share anything confidential that may help them go straight to your customer if that’s a possibility.

  1. Inventory Levels

Letting your suppliers know how much of their product you have sitting in your warehouse can help them know when to suggest further orders or delay orders to keep you inventory at target levels.

  1. Reliability of Service or Uptime

If you deal with service providers, especially web-based, then uptime can be a key component to measure and discuss.

  1. After Sales Support and Warranties

When your suppliers ship your order, is that the end of their responsibility? If not, how well do they handle after-sales support? Are they easy to work with and accept returns no questions asked? Or, are they so difficult that you don’t even bring the issues up?

What other metrics do you measure your vendors on? Leave a comment below, and please be sure to check my full guide on how to Build an Awesome Vendor Scorecard Program in 4 Easy Steps. Finally, here’s a quote that always gets me excited about doing more with metrics:

“When performance is measured, performance improves. When performance is measured and reported, the rate of improvement accelerates.”

-Thomas S. Monson

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5 Questions on How Startups Should Begin Improving Their Supply Chains

Improving Your Supply Chain
Hundreds of businesses are facing the exact same problems as you right now. Many are figuring out how to take their supply chain to the next level. What are some ways other companies have tackled what you’re up against?

In this latest podcast, I address five questions that have come up repeatedly in my conversations with small businesses:

  1. What are some ways to reduce costs and improve performance without sacrificing quality?
  2. How can a small business use technology to improve its efficiency?
  3. How can small business owners get employees and others to buy into managing their supply chain better?
  4. How can a small business oversee and boost the performance of their supply chain partners?
  5. What are some of my best suggestions for making the management of a supply chain more efficient?

Download or listen to the podcast from the link above, or check out the full podcast transcript. Also, be sure to subscribe to the podcast through iTunes or your other podcast app.

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The Most Popular Supply Chain Cowboy Articles of 2014

We’ve seen significant growth this year – online traffic and subscribers have more than tripled from 2013. It’s great to know there’s so many people working together to tame the wild west of supply chain management.

Below is a list of our five most popular articles from the past year:

Number 5 – How Skullcandy Rocked S&OP

How Skullcandy Rocked S&OPFor Supply Chain Cowboy’s first podcast, I had a great interview with Mark Kosiba, former VP of Operations at Skullcandy. He shared a ton of great advice on how small companies can leverage their nimbleness to grow and become world-class operations in competitive fields. If you haven’t yet listened to what Mark had to share, be sure to download it now so you can listen to it during your next commute.

Check it out here: How Skullcandy Rocked S&OP

Number 4 – Startups, Sourcing, and Sustainability with Mark Dwight of Rickshaw Bagworks – Interview Part 1 of 2

Mark DwightWant an example of what supply chain excellence and lean production really look like at a San Francisco bag company? Then be sure to check out this Q&A interview with the CEO of Ricksaw Bagworks. The article received a lot of positive social media attention, especially from people passionate about US-based manufacturing and small business entrepreneurs.

Check it out here: Startups, Sourcing, and Sustainability with Mark Dwight of Rickshaw Bagworks – Interview Part 1 of 2

Number 3 – One Easy Excel Formula to Track Shipments

Ship Track Excel FromulaIf anyone in your organization tracks packages, then they’ll definitely want to take a look at this article. It reviews a free excel add-in that lets you track shipments from most major carriers with a single formula. Even if you’ve shied away from tracking your shipments in the past because of how much work it can be, the article shows how that might now be possible.

Check it out here: One Easy Excel Formula to Track Shipments

Number 2 – Tips for the APICS CSCP Exam

Tips for the APICS CSCP ExamSupply Chain Certifications are growing in popularity to not only help build an educational base, but distinguish job seekers looking to advance their career. This article details what I learned while preparing for the APICS CSCP exam, including useful advice for how to tackle the test. The first section about whether the exam is even worth pursuing is a great read for supply chain managers wanting to develop their team’s skills.

Check it out here: Tips for the APICS CSCP Exam

Number 1, the Most Popular Article in 2014 – Build an Awesome Vendor Scorecard Program in 4 Easy Steps

Vendor Scorecard ExampleThis vendor scorecard how-to article won by a wide margin, attracting one in every four visitors during 2014. As supplier relationships become more important to a firm’s success, scorecards provide a simple and effective method of managing those connections. The downloadable template, included in the article, is a great place to start in building your vendor metric program. If you’re looking for the best bang for your buck in improving your supply chain, be sure to check this article out now.

Check it out here: Build an Awesome Vendor Scorecard Program in 4 Easy Steps

What’s Coming in 2015?

Here’s a sneak peak to a few articles and podcasts coming in the next couple months.

  • The First Steps in Improving Small Business Operations
  • Fighting Fires – a How-To Guide
  • More Business and Lean Quotes
  • Bringing Lean into Your Organization

What else would you like to see as topics for articles? I’ve had some great conversations with readers this past year, and I’d love to hear from you too. What topics are you interested in – and what challenges are you up against? Shoot me an email, or post in a comment below.

As always, thanks for reading, and have a great holiday season and a happy new year! Grab your cowboy hat and join me in riding your forklift into the sunset of 2014.

Interview for Bank of America Article

A couple weeks ago, I did an interview with Robert Lerose, who writes for the Bank of America blog. His article was posted this week, and it has some great advice for small business supply chains.

Check it out here:

Optimizing The Pipeline: Managing your supply chain more efficiently

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Learn How to Analyze Big Data for Free

Intro Databases and Statistical Learning“What Should I Study?”

Right before I started my first full-time job, I had a good talk with the chairman of my university’s supply chain department. I asked him, “If I were going to study more after I graduate, what do you suggest I focus on?” Without a second of hesitation, he responded, “databases and statistics.”

Really? Databases and statistics?

I had taken the required introductory statistics class. Then, I promptly forgot everything that Excel couldn’t automatically do for me.

I had also done a few queries in Microsoft Access, but anything more on databases was taught over at the computer engineering school – not the business school.

As I entered the workforce, I read up on many other topics related to my field: books on negotiations, communication, and network optimization. I received my APICS certification. Logistics and purchasing trade magazines covered my desk.

I eventually taught myself SQL through Sams Teach Yourself SQL in 10 Minutes so that I could better query our company’s databases, but that seemed like more than enough database knowledge for what I needed to do.

However, after a few years, I kept running into the term “big data.” Although there are many definitions for big data, I like to think of it as ‘more data than an Excel spreadsheet can handle’. What’s cool about big data, and the reason it’s gathered so much attention, is that you can find trends and patterns that were impossible to uncover before companies started collecting so much information. Faster computers also allow you to analyze that information without waiting weeks for your calculations to process.

All of this is extremely important to supply chains and company operations. Millions of dollars are just waiting to be saved if you can uncover better trends and patterns, especially in forecasts.

The surprise for me, however was that to be a big data ninja (or analyst, if you want to use the boring job title), you need fairly decent skills in two areas. Would you like to guess what those two skills are?

Databases and statistics.

Learn Databases and Statistics through Free Online Courses

Well here’s the best part of this article – you can start mastering both of those topics for free.

Stanford University is offering free online classes on both of those topics right now. The process is easy and straightforward:

  • Professors lecture, explaining concepts and examples through online videos
  • You read the free course materials and/or books
  • You work through examples with free open-source software
  • You take online quizzes and talk with other students.
  • You learn some awesome big data skills and even get a certificate of completion from Stanford when you finish

To enroll, you just register at the class websites: Introduction to Databases and Statistical Learning.

I’m taking the statistical learning class right now and I’m really enjoying it. A friend of mine finishing his MBA program let me know about the statistical learning class. His professor suggested that he may want to take it as he heads off to work for UPS.

The classes started about a month ago, but there’s no problem starting late and jumping in now. Plus – there’s no risk at all – so if you start and realize it’s not the thing for you, then oh well, no worries.

Why I’m Studying Statistical Learning

Databases make sense if you’re interested in getting into big data. However, statistics seems a little more intimidating to me. Here’s the reason I’m taking the statistical learning class.
Before the class, I knew how to use the trendline function in Excel to find the relationship between two variables. I could easily figure out if there’s a correlation between sales and the money spent on TV advertising.

However, now I’m learning how to find the correlation between multiple variables, such as sales and combined advertising in TV, radio, and newspaper. I’m in the middle of chapter 3, where I learned what method to use to figure out whether a variable actually relates, or if other variables are responsible for the change. For example, shark attacks and ice cream sales both go up in the summer, but ice cream isn’t causing shark attacks. Similarly, in the advertising data I’m working with, newspaper advertising appears at first glance to have an effect on sales. However, when we look at all the variables together, newspaper advertising doesn’t affect sales at all – only TV and radio advertising do.

Now that’s an awesome observation if you work in marketing, but how will that help our supply chain? I plan to approach our forecasts much differently after understanding these statistical analysis techniques. If I could find relationships on dimensions such as date, location, promotion, price, and other variables, then I could get much better forecasts and hold less inventory. Even if I could improve our forecasts just a little, that’d more than make my time in a free class worth it.

The class teaches you how to use an open-source program called R, which many companies are beginning to use such as Google, P&G, and Ford. If they’re using it, and it’s a free program, then maybe my growing company should use it too.

If anyone is brave enough to sign up with me, let me know, and we can work together on any tough problems we encounter.

Supply Chain Cowboy ApprovedThat’s my thought for the week. The internet and improvements in technology have given us the challenge and opportunity of big data. Similarly, the internet and Stanford has given us a free way to learn how to surmount that challenge. Pretty cool, and definitely Supply Chain Cowboy approved.

If big data is something that interests you, here’s a recent, related article: Getting Started with Big Data in a Small Business