Supplier Performance: Lessons From Canada Post (Part 2)

In the first part of this post, I gave a detailed explanation of how Canada Post measures supplier performance and the nuances of their particular approach to gathering feedback. In Canada Post's' view, there are 2 roles for scorecards. First is the protection of target savings. The goal in this case is to take both corrective and preventative action to insure defect free products and on-time supplier performance. The second role is the creation of new savings opportunities through continuous improvement and value creation. In this post, I'd like to share two examples that show how Canada Post has used their approach to take action with their supply base. In the first case, I'll examine what we'll term a supplier with subpar performance. In the second case, I'll describe a supplier with above average performance and how a scorecarding approach can improve performance even further.

Let's examine how this works. In case 1, Canada Post deals with a supplier that is not meeting expectations based on their own scorecard information. This is a poor performer who suffers from a lack of invoice accuracy and unsatisfactory service/responsiveness (hmmm ... we could probably all guess which category this is that we all buy). The scorecard enables Canada Post to establish a supplier performance trend overtime. Once the supplier becomes aware of their poor performance, they have a moment of self-actualization. A member of the supplier's executive team gets involved and hires a full-time resource to sort through the issues and determine the root cause. This results in improved responsiveness and enhanced long term performance. Although, to be candid, this response says nothing of the potential ethical implications of the invoice accuracy issues that plague the category in question.

Now let's turn our attention to a supplier that is already performing well. This supplier is consistently exceeding expectations, providing products / services with minimal defects and also offering exemplary customer service. You're probably wondering: why take action via a scorecard at all? The answer is that based on the supplier's overall success, Canada Post saw an opportunity to get even more value from this top performer. By leveraging this supplier's knowledge and expertise, they were able to save an additional 3.5% from the initial spend through joint development activities focused on product specifications, product simplification, standardization and value engineering.

So who says that there's not a role for scorecards in taking action with both your bottom and top performing suppliers? In the current environment where many of us are looking to scorecards and the broader concept of supplier performance management to help predict supplier failures, Canada Post proves out why scorecards are useful in both the worst of times and the best of times with our supply base.

- Jason Busch

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