by Victor Engesser, RVCF
The value of a retailer scorecarding capability is significant – measuring supplier compliance and performance identifies where business opportunities exist and where effort can yield value. RVCF views scorecarding as a foundational business capability and the use of scorecards as integral to the relationship management and partner collaboration process. Always trying to identify additional value that business partners can derive from their scorecarding capability, we set out earlier this year to research current best practices within and between those trading partners that use scorecards. We sponsored Lora Cecere and her team at Supply Chain Insights LLC to conduct a thorough scorecarding survey and to capture responses from both the perspective of the retailer and the supplier. We asked quite a few questions and, as suspected, came away with a surprising amount of new insights, the largest of which is that today's scorecarding perspective has substantial room for expansion that could generate additional business understanding and contribution to both trading partners.
As Lora points out in her report "While the greatest benefit of scorecards was in the improvement of the perfect order (a shipment that is on-time, in-full and accurate), the promise could be much, much more. Since the focus has been on logistics and the perfect order, the scorecard has had little impact on assortment or total costs." After more than a decade of use, today's scorecards have facilitated improvements in logistics and the Perfect Order but the opportunity remains for a broader, more impactful scorecarding role in the retailer/supplier relationship. This broader perspective is well worth consideration – a more complete, holistic scorecarding approach could extend performance understanding and improvement well beyond the supply chain relationship.
For many retailers the historic supply chain centric approach to scorecard development may have limited the role and overall contribution of today's scorecards. Having proven value in order accuracy and on-time delivery, an expansion into key performance indicators (KPI's) that can capture and report performance in other parts of the business relationship, such as inventory, space, advertising, and assortment productivity, would be welcomed and supported by senior management. The challenge will likely be around who and how this scorecarding expansion is managed and how these additional insights are owned and executed internally by retailers.
Looking at survey responses, it was not a surprise that suppliers cared the most about billing and compliance, but it was interestingly to note that suppliers in the survey indicated that they were concerned about a broader range of opportunities than their retailer partners. Areas such as cost, promotion, and use of standards were viewed as more important by the suppliers and this was likely driven by the perspectives of the individuals responding with supplier responders having a broader span of accountability or involvement. However, this would still suggest that "cost" KPI's in areas such as GMROI, owned inventory, inventory turns, and margin realized to budget could all contribute to a deeper, more collaborative, scorecard contribution to joint business planning and review.
A Couple of Other Interesting Takeaways...
Looking at how many retailers share data with their suppliers, Lora pointed out that "the primary sharing of data by the retailer is via a portal with a focus on sharing the retail forecast. Unfortunately, the portal is one of the most ineffective ways to share data and the retail forecast is less important to the supplier than warehouse withdrawal data and the perpetual inventory signal. A more effective method of data sharing for the supplier is the use of retail private networks."
The survey also confirmed that for suppliers, the retailer scorecard review and discussion is now a common part of their internal cross-functional team reviews and that these reviews occur most often on a monthly basis. Internally these suppliers see their largest internal alignment challenges between their sales, operations, and IT teams. Retailers' responses indicated that internal alignment and communication challenges were greatest between the merchant and operations teams and between the inventory and advertising teams.
Read all of Lora's findings and her recommendations in The Supply Chain Insights final report "What is the Value of a Retail Scorecard, Results from a Quantitative Study of 65 Retailers & Suppliers" which can be accessed via this link.
If you would like to see each survey question and the collective response data in order to dig even deeper on your own and review information not covered in the summary report a PowerPoint version of the responses we gathered to each of the survey questions can be accessed via this link.
RVCF welcomes your questions, comments, and suggestions regarding scorecarding. Feel free to e-mail me at firstname.lastname@example.org.
Victor Engesser is Retail Executive Advisor for RVCF. He works closely with RVCF retail members to support their needs and objectives throughout the year. He has presented at numerous industry events and conferences on topics including Supplier Performance Management, Scorecard Development, and Negotiations. Prior to becoming an independent retail consultant in 2009, Victor was Vice President of Vendor Relations at Circuit City. In this role he managed multiple areas that supported the corporate relationship between Circuit City and their vendor partners. During his 17 years at Circuit City, Victor also held numerous senior merchandising positions across multiple buying areas. Prior to Circuit City Victor was a founding member and senior merchant of the Shop Television Network, an upscale home shopping channel which became the JCPenney Shopping Channel.
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