- The document discusses managing supplier performance through scorecards and key performance indicators (KPIs). It provides examples of typical scorecard components like delivery, quality, and qualitative measures. - Scorecards aim to drive continuous improvement across the supply chain through monitoring KPIs. While good for transparency and improvement, scorecards have limits in quickly replacing underperforming suppliers. - The discussion includes questions from the audience about supplier performance management technology.

1. © 2014 MetricStream, Inc. All Rights Reserved.
Managing supplier performance – A key competitive
advantage
March 25, 2014
Dan Dodd
Director Supply Chain
Hi-Tech Manufacturing
Piyush Kothari
Manager Product Marketing
MetricStream

2. © 2014 MetricStream, Inc. All Rights Reserved.
Highlights
• Industry best practices for compilation of supplier scorecards that help
measurement of KPIs and support strategic procurement initiatives
and to improve supplier performance
• Technology that enables a centralized evaluation of supplier, for
continuous improvement with effective collaboration with suppliers with
seamless workflows and information sharing
• Q & A

3. MANAGING SUPPLIER
PERFORMANCE
S U P P LY S C O R E C A R D S , I N T H E C O N T E X T O F O P E R AT I O N A L
E X C E L L E N C E
3/26/2014 3

4. CONTENTS
• Defining operational excellence
• In order to put scorecards in context
• Setting expectations
• Scorecard samples
• The typical components of a scorecard
• The value of scorecards
• What they are good at
• And not so good at
3/26/2014 4

5. OPERATIONAL EXCELLENCE – TWO KEYS
5
24 month Demand,
Supply, & Inventory
plans
Management
Business Review
Demand
Review
Supply
Review
Product
Review
Finance IR
Review
Start
(Begin Month)
MRP
• Executive led
• One plan aligned
with financials
Doing the Routine Routinely
Sales & Operations Planning
3/26/2014 5
Modern operational excellence is 75% lean and 25% S&OP in terms
of effort/focus, but S&OP comes first because it sets the direction

6. VALUE OF OPERATIONAL EXCELLENCE
3/26/2014 6
Company A has core competency in
operational excellence and significantly
outperforms:
• Dow Jones
• B - investing company
• C - operations and marketing
• D - investing
• E – innovation and marketing
Company F prior to attempted
acquisition by Company A,
underperforming to Dow Jones
F tracking to A since
Operational
excellence
can create
as much
value as
innovation,
and more
steadily.
A B D EC
F F A

7. GRAPHICAL REPRESENTATION
3/26/2014 7
• Requires tight integration in people,
processes, and systems
• Kanban/Pull and S&OP across the supply
chain requires a lot of information sharing
• The scorecards measure the historical
performance of each supply node

8. SETTING EXPECTATIONS
• Start the process by being clear about expectations with
the supplier:
• Zero quality issues
• Does the supplier have the capabilities?
• 100% on-time delivery
• Does the supplier have capacity?
• Competitive pricing
• Domestic, internal?
• Technology you can grow with?
• Inventory levels? A pull system
3/26/2014 8
Where do you stand
today vs. these
expectations?
How much
performance and
savings can be
accomplished by
meeting them?

9. SAMPLE SCORECARD
3/26/2014 9
• Targeted at “key” suppliers
• 80/20 rule in spend
• Critical functions
• Must include:
• Description/manual
• The raw data

10. THE COMPONENTS - DELIVERY
• Need three dates (at the line level):
• Promised – the date delivery is measured against
• Expected – when delivery is currently expected (for MRP)
• Actual – final date when line was received complete
• Measure to:
• X (e.g. 7) days early
• Y (e.g. 1) day late
• Outside of ranges (e.g. +/- 10%)
• Formula: # of on-time lines / lines expected
• Can have a cut-off (e.g. <95%=0, 96%=20/100)
3/26/2014 10

11. THE COMPONENTS - QUALITY
• More variability in both numerator and denominator,
including:
• # of shipments accepted/# of shipments received
• # of lots accepted/# of lots received – 0.05* late SCARs
• # of supplier NCMRs/# of lots received
• # of supplier CARs/# of lots received
• Often weighted more than delivery (40% vs 30%)
3/26/2014 11

12. THE COMPONENTS - QUALITATIVE
• Ask any communities that interact with the supplier to rank between 1-10
• Quality
• Engineering
• Purchasing
• The key is to detail what the supplier can do better if they did not get a 10
• Can provide prompts such as: how quickly do they respond to
communications
• Average across the communities and provide the detail
• Typically great enthusiasm at the beginning, but tails off
• Can be better to measure quarterly rather than monthly
3/26/2014 12

13. THE COMPONENTS - OTHER
• Cost reductions are typically handled outside scorecards
• Quarterly reviews
• Contracts
• Spend
• Always important to be aware of the dollars
• In the summary, information on their role in the supply
chain, e.g.:
• What parts they support, and for which customers
• Service vs. raw material
3/26/2014 13

14. SAMPLE SCORECARD SUMMARY
3/26/2014 14
• Gives great
view across the
supply chain
• Goal is
continuous
improvement in
the process and
the aggregated
score

15. OTHER CONSIDERATIONS
• Better to report monthly rather than quarterly
• Both sides forget what happened two months ago
• Critical that you are looking for agreement on dates and
quality issues – give the benefit of the doubt
• Result includes alignment on and better management of
dates and quality issues
• Roadblocks include:
• Not receiving the day the parts arrive
• Takes resources to manage
• Large number of suppliers – format needs to be simplified
• What supplier gets: more business
3/26/2014 15

16. VALUE OF SCORECARDS
• What they are good at
• Improving the integration and information
• Driving continuous improvement across the whole supply chain in
delivery, quality, and customer service
• What they are not so good at
• Changing suppliers quickly
• Can include language such as additional observation for poor-
performers
• Sometimes you can’t change them
• But the process is just as valuable
3/26/2014 16

17. © 2014 MetricStream, Inc. All Rights Reserved.
Piyush Kothari
Manager Product Marketing
MetricStream
Supplier Performance Management
Technology for Improved Reliability and Efficiency

18. © 2013 MetricStream, Inc. All Rights Reserved.
Expanding role of Suppliers
SupplierProduct
Design
Product
Development
Engineer
innovation
Outsourcing
Material
Testing
Storage
Packaging
/Labeling
Consumer
advice
Raw Material
Marketing
agencies IT
Contingent
labor
Legal Consultants
Contingent
labor

19. © 2013 MetricStream, Inc. All Rights Reserved.
Key Challenges in managing Supplier Performance
• Inability to manage the changes, Lack of capabilities to measure
supplier performance
Increased complexity of the supplier networks
• Resource-intensive to manage and monitor, Exposure to supply chain
risks
High costs of monitoring performance
• Country / region specific regulations, Fines, potential recalls and
lawsuits
Failure to manage compliance pressures
• Siloed approach to manage supplier functions, Data redundancies
Lack of integrated approach

20. © 2013 MetricStream, Inc. All Rights Reserved.
Federated Architecture
• Federated architecture
– Centralized controls and visibility
– Decentralized processes and
ownership
– Supporting complex, multi-
dimensional relationships
• Large scale adoption
– Extended enterprise participation
– Simplified user experience
– Collaboration, personalization,
mobile access

21. © 2013 MetricStream, Inc. All Rights Reserved.
Automating Supplier Information Management
• Internal Sources
• Historical data on supplier performance
within application or via integration with
external applications in an organization’s
ecosystem
• External sources
• Strengthen certification using RDC, D&B,
Maplecroft, LexisNexis capability with
aggregate, validate and enrich supplier
data
• Unstructured Data
• Internet, Social Media
Integrated scorecards that combines internal
KPIs and metrics with reliable source’s
insights
Triggering compliance risk assessments,
policy updates

22. © 2013 MetricStream, Inc. All Rights Reserved.
Supplier Contract Management
Supplier Performance
Measurement
Supplier
Performance
Scorecards
• Define Supplier Metadata
• Create Supplier Contract
• Define Quality, CSR, Financial
Requirements
• Establish KPIs based on Contracts
• Evaluate and Measure Supplier Performance
Supplier Performance Management

23. © 2013 MetricStream, Inc. All Rights Reserved.
Supplier Information Management
Profile
Certifications
Risks and
Controls

24. © 2013 MetricStream, Inc. All Rights Reserved.
Supplier Surveys & Self-Assessments
On-Boarding
Assessment

25. © 2013 MetricStream, Inc. All Rights Reserved.
Manage Supplier Contracts and Other Controlled Documents
Define and manage
recurring events
Create new Contract
Capture extended
meta-data

26. © 2013 MetricStream, Inc. All Rights Reserved.
External entities as a source of newer Risks
SuppliersandSub-suppliers
Vendors
Partners
ServiceProviders
Contractors
Agents
Reputation, Brand Risk
Supply Chain Risk
Financial Risk
Production Risk
Business Continuity Risk
Internal Ecosystem
Risks
Health, Safety, Security Risk
ILS, Conflict Minerals
EHS, REACH, RoHS
Local Laws, Anti-Bribery

27. © 2013 MetricStream, Inc. All Rights Reserved.
Relationship Risk
Supplier Risk Assessment
Vendor Risk
Assessment
Vendor
Performance

28. © 2013 MetricStream, Inc. All Rights Reserved.
Manage KPIs & KRIs

29. © 2013 MetricStream, Inc. All Rights Reserved.
Mapping KPIs to KRIs
Define KPIs and
metrics based on
contracts and policy
Define threshold for
risks
Define escalation and
mitigation plan

30. © 2013 MetricStream, Inc. All Rights Reserved.
Supplier Scorecard

31. © 2013 MetricStream, Inc. All Rights Reserved.
31
Supplier Scorecard Data Entry Form

32. © 2013 MetricStream, Inc. All Rights Reserved.
32
Supplier Performance Scorecard
Scorecard Category Scorecard Metrics/KPIs
Scorecard Performance Status

33. © 2013 MetricStream, Inc. All Rights Reserved.
Scorecard Drill-down

34. © 2013 MetricStream, Inc. All Rights Reserved.
Real-Time Scorecard

35. © 2013 MetricStream, Inc. All Rights Reserved.
Supplier Improvement Plan

36. © 2013 MetricStream, Inc. All Rights Reserved.
Ongoing Performance Monitoring

37. © 2013 MetricStream, Inc. All Rights Reserved.
Ongoing Performance Monitoring

38. © 2013 MetricStream, Inc. All Rights Reserved.
Ongoing Adherence Monitoring

39. © 2013 MetricStream, Inc. All Rights Reserved.
Reporting and Dashboards

40. © 2013 MetricStream, Inc. All Rights Reserved.
Supplier Issues – Action Tracking
Employee
Capture Issue
Analyze, Assess Risk,
Validate & Assign
Investigate Remedial Action
Approve & Close
Investigators
Manager
Department Heads
Senior Management
Monitoring , Reporting & Analytics
C
O
M
M
U
N
I
C
A
T
E

41. © 2013 MetricStream, Inc. All Rights Reserved.
Measuring and Monitoring Supplier Performance
Leading Industrial Distribution Company
• Integrated solution for managing supplier information, on-boarding, evaluation,
RFQ, auditing and selection processes
• Provided system to more than 50,000 suppliers and serve as a central repository
for supplier performance management and audit
• KPI and KRI evaluation, Scorecards, Reporting and management dashboards
• Global implementation of Integrated supplier governance Solution
across multiple countries, currencies and languages
• Managing supplier contracts, supplier performance with scorecards
• Single view of the supplier risk processes based on MetricStream
GRC Platform.
Fortune 500 Financial Services Company

42. © 2013 MetricStream, Inc. All Rights Reserved.
Streamlining Supplier Information
Leading Entertainment and Media Company of the World
• Supplier/Licensee qualification, annual re-qualification, contract management,
maintain registration information and third party audits
• Audit Management, Monitor Licensees and Suppliers to ensure review of the
CAP with the Facility
• Implementation of a corrective action plan and prompt remedy to violations
• More than 200,000 users and suppliers across 80 countries
• Supplier governance process including performance evaluation,
scorecards
• Global convergence of multiple GRC initiatives on a single, centralized
platform
One of the Largest Consumer Products Brand

43. © 2014 MetricStream, Inc. All Rights Reserved.
• Over 1,300 employees
• Headquarters in Palo Alto, California with offices worldwide
• Over 300 enterprise customers
• Privately held – backed by leading global VCs
About MetricStream
Integrated Governance, Risk and Compliance
for Better Business PerformanceVision
Solutions
• Governance & Ethics
• Risk Management
• Compliance Management
• Audit Management
• Legal GRC
Partners
Differentiators
• Technology - GRC Platform – 9 Patents
• Breadth of Solutions – Single Vendor for all GRC needs
• Cross-industry Best Practices and Domain Knowledge
• ComplianceOnline.com - Largest Compliance Portal on the Web
Organization
• Supplier Governance
• Quality Management
• EHS & Sustainability
• IT-GRC
• Content and Training

44. © 2014 MetricStream, Inc. All Rights Reserved.
Product Leadership: “A Disruptive Force”
“MetricStream’s fast growth
is a disruptive force in the
market.”
Highest score for Current
Offering criteria for strength
of product offering and
capabilities
- Forrester Wave™: GRC Platforms, Q1 ’14

45. © 2014 MetricStream, Inc. All Rights Reserved.
MetricStream GRC Summit 2014

46. © 2014 MetricStream, Inc. All Rights Reserved.
Q&A
A copy of this presentation will be made available to all participants in next 48 working hours.
Please visit www.metricstream.com for more details on upcoming webinars.
Please submit your questions to the host by typing into the chat box on
the lower right-hand portion of your screen.
Thank you for participating!
Piyush Kothari
Manager Product Marketing
MetricStream
Email - piyushk@metricstream.com
Dan Dodd
Director Supply Chain
Hi-Tech Manufacturing
Email - ddodd@hi-tech-mfg.com

47. © 2014 MetricStream, Inc. All Rights Reserved.
Thank You
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