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Developing a Supplier Scorecard and Performance Management Process in a Fortune 100 Pharmaceutical Company

The Problem

Lack of clarity around supplier performance (especially for suppliers of services related to clinical trials and other complex projects) made it impossible for this Fortune 100 Pharmaceutical company, "MegaPharma", to identify the best suppliers with whom to create preferred relationships, to award specific projects to the most qualified supplier, or to work jointly with suppliers to improve performance.

Prior efforts over the course of a year failed to produce a viable scorecard or gain sufficient buy-in from business stakeholders to enable successful implementation. Meanwhile, previous investments in supplier relationship management (e.g., quarterly business reviews, annual executive summits, and the like) showed little return due to the lack of meaningful performance data.

The Approach

A structured scorecard, focused on the most critical measures of performance and value, combined with a comprehensive performance measurement and management process – one comprising clearly defined activities, and roles and responsibilities, for measuring both supplier and customer performance.

Vantage Partners partnered with MegaPharma to try again to develop a comprehensive, and consistent approach to supplier performance measurement and management. Working with a cross-functional team with representation from the Supplier Management Group in Strategic Sourcing, from clinical teams in all the therapeutic areas, from Finance, and from the Contracts group, Vantage first began by helping MegaPharma clarify the objectives for the overall performance management system in which the scorecard would be situated.

Lessons Learned

  • Don’t try to measure too much. Measurement is a costly activity, trying to measure too much is a recipe for non-compliance.
  • After iterative development and refinement of scorecard metrics, sanity-test the entire scorecard. Will the benefits outweigh the costs? What needs to be further pruned to make the system practical?
  • Involve key suppliers in defining metrics, as well as designing the performance measurement and management system.
  • Define and utilize metrics that focus on the value your key suppliers are getting out of the relationship.
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