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How to: Building a vendor scorecard

Here are five key issues to consider before you start.

By Christine Dunn
May 29, 2006 12:00 PM ET

Computerworld - When Jim Healey, vice president and CIO at Affymetrix Inc., joined the biotechnology firm in February, the first thing he did was ask for a list of all the Santa Clara, Calif.-based company's IT vendors, sorted by the dollar amount of business that had been conducted with them in the past two years.

Affymetrix used its vendor scorecard, fed by data from its ERP system, to compile the data. With that information, Healey could easily see the top 15 companies whose representatives he needed to meet. The scorecard also provided the names of the account executives for every vendor, giving Healey the opportunity to contact each one proactively.

"I found many names in that list, such as Microsoft, IBM, Cisco and Sun, but I also found names that were unfamiliar to me, including some temporary employment agencies and technology service providers," Healey says.

He reached out to these top vendors to introduce himself and to get familiar with their businesses. "Without a scorecard, I wouldn't have been able to do this right away," he says.

IT managers use scorecards to organize and evaluate data about their IT suppliers and processes. Score-cards allow them to monitor the performance of their vendors in order to cut costs, mitigate risk and drive continual improvements in products and services. It's the measure by which they manage vendors. Here are five key issues to consider in building your own scorecards.

1. Metrics. The effectiveness of a vendor scorecard depends on the type and quality of the information that it tracks. The most common mistake companies make is trying to measure too many things and losing focus on key metrics for the business, says William Maurer, an analyst at Gartner Inc.

Another mistake is collecting the most accessible data. "People tend to collect the information that is easiest to get," says Sherry Gordon, vice president of supplier performance intelligence at Emptoris Inc. "You have to collect the right stuff."

Managers who will be using the data need to decide what they're trying to accomplish with the information. Measures to manage the costs of products and services will be different from those used to improve quality, for example. "You don't want to just collect the data for the sake of data," Gordon says. "You need to be able to take action on the information."

The Allstate Corp. focuses its scorecards on performance criteria, including how well suppliers meet their deadlines, the quality of the service received, and whether products and services meet Allstate's budgetary goals. Scorecards help take the emotion out of the rankings. "We really like to focus on the performance of suppliers rather than on relationships," says Lori Yelvington, assistant vice president for procurement governance. "We have scorecards so that we have solid facts to base our relationship on."

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