Supplier Scorecard
Framework
IRON LAW: Evaluate on QCDS (Quality, Cost, Delivery, Service) — Not Just Price
The cheapest supplier who delivers defective parts late with no support
is the most expensive supplier. Total Cost of Ownership (TCO) includes:
purchase price + incoming inspection + rework + downtime from defects +
expediting fees + management overhead.
NEVER select suppliers on price alone.
Four Evaluation Dimensions (QCDS)
| Dimension | Weight (typical) | KPIs |
|---|
| Quality | 30-40% | Defect rate (PPM), incoming inspection pass rate, certifications (ISO 9001), corrective action responsiveness |
| Cost | 20-30% | Unit price, total cost of ownership, price stability, payment terms |
| Delivery | 20-30% | On-time delivery rate, lead time, lead time variability, flexibility for rush orders |
| Service | 10-20% | Responsiveness, communication quality, technical support, willingness to collaborate on improvements |
Scoring Method
- Define KPIs per dimension (2-3 per dimension)
- Set weights (must sum to 100%)
- Score each KPI: 1-5 scale with clear definitions:
- 5 = Excellent (top 10% of suppliers) - 4 = Good (meets all requirements consistently) - 3 = Acceptable (meets most requirements) - 2 = Below expectations (frequent issues) - 1 = Unacceptable (critical problems)
- Calculate weighted total
- Classify: A (>4.0), B (3.0-4.0), C (2.0-3.0), D (<2.0)
Supplier Classification & Actions
| Grade | Score | Strategy |
|---|
| A | >4.0 | Preferred supplier, increase business, joint development |
| B | 3.0-4.0 | Approved supplier, maintain, targeted improvement |
| C | 2.0-3.0 | Conditional, improvement plan required within 90 days |
| D | <2.0 | Phase out, begin alternative sourcing immediately |
Risk Assessment
| Risk Factor | Question | Mitigation |
|---|
| Single source | Is this supplier the only source for a critical component? | Develop backup supplier |
| Geographic | Is the supplier in a region prone to disruption? | Dual-source across regions |
| Financial | Is the supplier financially stable? | Monitor credit, require financial disclosures |
| Capacity | Can the supplier scale with our growth? | Capacity commitment agreements |
| IP | Does the supplier have access to our proprietary designs? | NDA + IP clauses in contract |
Supplier Development Program (SDP)
For C-grade suppliers worth keeping:
- Gap analysis: Where specifically are they falling short?
- Improvement plan: Specific, measurable, time-bound targets
- Support: Provide training, share best practices, co-invest if needed
- Review: Monthly progress checks, 90-day formal reassessment
- Decision: Improved to B+ → continue. Still C or worse → phase out.
Output Format
# Supplier Scorecard: {Supplier Name}
## Overall Score: {X.X} / 5.0 — Grade: {A/B/C/D}
## Detailed Scores
| Dimension | Weight | Score | Weighted |
|-----------|--------|-------|---------|
| Quality | {%} | {X.X} | {X.XX} |
| Cost | {%} | {X.X} | {X.XX} |
| Delivery | {%} | {X.X} | {X.XX} |
| Service | {%} | {X.X} | {X.XX} |
| **Total** | **100%** | — | **{X.XX}** |
## KPI Details
| KPI | Target | Actual | Score |
|-----|--------|--------|-------|
| Defect rate | <500 PPM | {X} PPM | {1-5} |
| On-time delivery | >95% | {%} | {1-5} |
| ... | ... | ... | ... |
## Risk Assessment
| Risk | Level | Mitigation |
|------|-------|-----------|
| {risk} | H/M/L | {action} |
## Action Plan
{Based on grade: preferred/maintain/improve/phase out}
Gotchas
- Weighting should reflect YOUR priorities: A medical device company should weight Quality at 50%+. A commodity buyer might weight Cost at 40%. Don't use generic weights.
- Score inflation: Purchasing teams may inflate scores to avoid difficult conversations with suppliers. Require data-backed evidence for each score.
- Review frequency: A-grade quarterly, B/C-grade monthly, D-grade weekly until resolved.
- Supplier relationship matters: Scorecards are tools for improvement, not punishment. Share results with suppliers transparently — the best suppliers want feedback.
- TCO includes hidden costs: Don't forget: incoming inspection labor, warehouse space for safety stock (to cover unreliable delivery), engineering time for quality issues, customs/logistics for overseas suppliers.
References
- For TCO calculation methodology, see
references/tco-calculation.md - For supplier audit checklists, see
references/supplier-audit.md
