A Vendor Scorecard Can Prevent Financial Disaster for Your Company

Hopefully, you’ve only heard the stories; you haven’t been one. A vendor defaults on a large order and the company goes down the tubes. This could happen to you; it’s happened to many other businesses. Vendor management is important for your operation, especially if you’re looking to work with new suppliers to boost your product and your sales. A vendor scorecard can give you snapshot of a vetted vendor, so you can be certain you can trust the company prior to signing on the dotted line.

The Supply Chain

It’s basic Business 101, but a person has an idea of a product he or she wants to manufacture. In order to do so, he or she must have the materials to make the product. His or her specialty is manufacturing the final product, not manufacturing its parts. In order to get the parts already made, the business owner has to work with vendors who specialize in those parts, and this supply chain relationship is born. Without a vendor scorecard, the owner must trust that this vendor will deliver the goods as promised; otherwise, it affects, drastically, the rest of the supply chain.

Once the parts are received, the manufacturer builds the product. Next, comes the task of selling it to customers directly or through a third party. This is the rest of the supply chain. The vendor supplies the parts, the manufacturer uses them to make the product, then he or she sells it to the customer or ships it to his or her sellers. If the product requires parts from many different vendors, vendor management becomes a priority.

Supplier Default

If you’re interested in what a vendor scorecard is, you likely already have this type of supply chain in place. Assume for a moment that your engineering team just came up with the next best gadget and your sales team already has interested customers. You reach out to your vendors and set up contracts for the supplies you’ll need to begin production. You give the sales team to go-ahead and pre-sale, and you have orders flowing through your doors already.

One supplier defaults. He just disappears. You have no way of contacting him and without his parts your manufacturing line just grinded to a screeching halt. You have to tell your sales team to go back to the customers and extend the delivery date. The customers are angry… there’s no need to go on. Without a way to stay on top of your vendor management, this could happen. Even in existing working relationships, suppliers default. You need to stay on top of their business.

 

How do you do that? By working with a company that makes it their business to vet qualified vendors and suppliers and keep a vendor scorecard for each one. These cards are quick references that outline the stability of a supplier among other things. By keeping track of performance records, financial capacity, and aggregate exposure, this company can identify any third-party risk which you might be exposed to by your existing and future vendors, and this is vendor management at its best.