You probably have a gut sense of which suppliers are reliable and which cause headaches. But gut feelings don't give you leverage in negotiations, don't help you make objective decisions about who to keep or replace, and don't track whether performance is improving or declining.
A vendor scorecard turns subjective impressions into measurable data. It gives you facts to back up conversations with suppliers, helps you allocate business to your best performers, and identifies problems before they become crises. Here's how to build one that actually works for CPG brands.
Why Score Your Suppliers?
- Drive accountability: Suppliers who know they're being measured tend to perform better.
- Make data-driven decisions: Should you shift volume from Supplier A to Supplier B? Data tells you.
- Identify improvement opportunities: Scorecards reveal patterns—maybe a supplier is great on quality but terrible on delivery.
- Support negotiations: "Your on-time delivery was 72% last quarter" is more powerful than "You're always late."
- Document for risk management: If you need to justify dropping a supplier, scorecard history provides the evidence.
Core Metrics for Your Scorecard
Don't measure everything—measure what matters. For most CPG brands, these four categories cover 90% of what you need:
Quality Performance
- Defect rate: Percentage of units received that fail inspection or are returned due to quality issues. Calculate: (Defective units / Total units received) × 100
- Lot acceptance rate: Percentage of received lots that pass inspection on first check.
- Quality incident count: Number of significant quality events (recalls, widespread defects, customer complaints traced to supplier).
Target: Most CPG brands target defect rates under 1%, with best-in-class suppliers hitting under 0.5%.
Delivery Performance
- On-time delivery rate: Percentage of orders delivered by the committed date. Calculate: (On-time orders / Total orders) × 100
- Complete order rate (fill rate): Percentage of orders shipped complete, without partials or shorts. Calculate: (Complete orders / Total orders) × 100
- OTIF (On-Time In-Full): Combines the above—percentage of orders that were both on-time AND complete.
Target: Aim for 95%+ on-time delivery for reliable planning. Top suppliers hit 98%+.
Cost Performance
- Price variance: How actual prices compare to contracted or quoted prices.
- Cost change frequency: How often the supplier requests price increases.
- Total cost of ownership: Beyond unit price—factor in freight, quality costs, returns, expediting fees.
Price alone doesn't tell the story. A supplier with a higher unit price but zero quality issues and perfect delivery might have lower total cost than a cheap but unreliable alternative.
Responsiveness
- Quote turnaround time: How quickly they respond to RFQs.
- Issue resolution time: How long to resolve quality issues, claims, or disputes.
- Communication quality: Subjective, but track it—do they proactively communicate delays? Are they easy to reach?
Responsiveness matters when things go wrong. A supplier who hides from problems is worse than one who responds quickly, even if the latter has slightly more issues.
Building the Scorecard
Assign Weights
Not all metrics matter equally for your business. Assign weights that reflect your priorities:
Example weighting for a CPG brand:
- Quality: 30%
- Delivery: 35%
- Cost: 20%
- Responsiveness: 15%
A brand with extremely tight shelf-life constraints might weight delivery even higher. A premium brand where quality issues destroy customer trust might weight quality at 40%+.
Define Scoring Scales
Convert raw metrics into comparable scores. A common approach uses a 1-5 scale:
On-Time Delivery example:
- 5 = 98%+ on-time
- 4 = 95-97% on-time
- 3 = 90-94% on-time
- 2 = 80-89% on-time
- 1 = Below 80% on-time
Define similar scales for each metric. Be specific about the thresholds so scoring is consistent.
Calculate Weighted Score
Multiply each metric score by its weight, sum them up, and you get an overall supplier score.
Example:
- Quality score: 4 × 0.30 = 1.20
- Delivery score: 3 × 0.35 = 1.05
- Cost score: 4 × 0.20 = 0.80
- Responsiveness score: 5 × 0.15 = 0.75
- Overall: 3.80 out of 5.00
Using the Scorecard Effectively
Share Results With Suppliers
Transparency drives improvement. Send quarterly scorecards to your suppliers with their scores and how they compare to targets (or anonymized peer performance). Most suppliers genuinely want to know how they're doing.
Set Improvement Targets
A supplier scoring 3.2 shouldn't be expected to jump to 4.5 overnight. Set realistic improvement targets—maybe 3.5 in the next quarter. Track progress over time.
Connect Scores to Consequences
Scores matter more when they have real implications:
- Suppliers scoring above 4.5 get first priority for new business
- Suppliers below 3.0 get put on improvement plans
- Suppliers below 2.5 for two consecutive quarters get replaced
Whatever your thresholds, make them clear upfront.
Review Trends, Not Just Snapshots
A supplier who scored 3.8 last quarter and 3.2 this quarter is more concerning than one who consistently scores 3.3. Trends reveal whether suppliers are improving, stable, or declining.
Common Mistakes to Avoid
- Measuring too many things. Ten metrics create confusion. Stick to the vital few that actually drive your decisions.
- Not collecting accurate data. Scorecards built on sloppy records produce misleading results. Fix your data collection first.
- Creating but not using the scorecard. If scores don't affect decisions, suppliers learn to ignore them.
- Weighting everything equally. Different metrics matter differently. Weight according to business impact.
- Never updating thresholds. As performance improves, what was good becomes average. Raise the bar over time.
Key Takeaways
- Vendor scorecards turn subjective impressions into measurable, actionable data
- Focus on four categories: quality, delivery, cost, and responsiveness
- Weight metrics according to your business priorities
- Share scorecards with suppliers and set improvement targets
- Connect scores to real consequences—new business allocation, improvement plans, or replacement
Frequently Asked Questions
How do I measure supplier performance?
Track metrics across quality (defect rate, lot acceptance), delivery (on-time %, fill rate), cost (price variance, total cost), and responsiveness (issue resolution time, communication). Score each metric on a consistent scale, weight by importance, and calculate an overall supplier score.
What KPIs should I use for supplier evaluation?
Start with: on-time delivery rate, OTIF (on-time in-full), defect rate, price variance, and issue resolution time. These cover the most critical performance areas for most CPG brands. Add industry-specific metrics as needed—like certifications for food safety, for example.
How often should I update vendor scorecards?
Calculate and review scores quarterly at minimum. High-volume or high-risk suppliers might warrant monthly reviews. The data should update continuously; the formal scorecard review and supplier communication happen quarterly.
Should I share scorecards with suppliers?
Yes. Sharing scores drives improvement because suppliers know where they stand and what to work on. Share the score, the methodology, and how they compare to targets. Most suppliers appreciate the feedback and the clarity about expectations.
What's a good supplier score to target?
On a 5-point scale, scores above 4.0 indicate strong performers. Scores between 3.5-4.0 are acceptable with room for improvement. Below 3.5 needs attention, and below 3.0 should trigger serious evaluation of whether to continue the relationship.