Keeping a 3PL scorecard: Part II
If your company can’t answer what I call the “so what?” question about a particular item, than it probably doesn’t belong on your scorecard.
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Scorecards are widely used by shippers to monitor and grade the individual performance of their 3PLs today. But not all scorecards in the world are being designed and used to derive the best possible efficacies they are capable of delivering. This is the second of a three-part exclusive web exclusive written by David Frentzel is APL Logistics’ Vice President for Global Contract Logistics.
The article discusses the benefits that can be derived from using scorecards, shares some of the best practices in scorecarding, and highlights the common mistakes that should be avoided in deploying the scorecard system.
Even though it’s tempting to measure every aspect of a 3PL’s performance, having a bloated scorecard usually only results in creating more work for suppliers – and making it difficult for those who are reviewing the cards to focus on what’s truly most important. If your company can’t answer what I call the “so what” question (“Why is this measure really here?”) about a particular item, than it probably doesn’t belong on your scorecard.
Limiting The Universe Of Respondents
Realistically speaking, there’s not enough time in the day for most companies to do a credible job of monitoring all of their 3PLs and other logistics suppliers, especially not if they’re frequently circling back with these suppliers to discuss scorecard findings. Additionally, some suppliers may have such a small piece of a company’s business that the costs of having these suppliers complete and maintain a scorecard would significantly outweigh the benefits.
For best results, use scorecards only with those suppliers who serve the most significant portion of your business. Or at least roll the scorecard process out to them first.
Differentiating Between 3PLs’ Individual Locations
Although less is usually more when it comes to how many scorecards a company maintains, that doesn’t mean you should lump all of a 3PL’s departments or locations onto a single scorecard. Averaging all of these locations’ performance data together may fail to call attention to the red flags you’d ordinary see if there was one scorecard per facility. It also could make it that much more difficult to commend or correct the right personnel at the right location for a job well (or not-so-well) done.
The bottom line: When a 3PL provides you with several strategic services in many different areas or geographies, use a different scorecard for each. You can always merge and average these separate cards’ results if you really want to get a more holistic view of how the provider is performing. Or you can supply the provider with an additional scorecard that takes this collective service into account.
Benchmarking Across Providers Or In-House Operations
While Shakespeare may have felt that comparisons are odious (or as he put it, “odorous”), he clearly wasn’t a supply chain management professional.
By using scorecards to compare and contrast the performance of various 3PLs that are providing services in your supply chain as well as your internal operations, your company will gain a valuable chance to see how various players stack up against each other as well as against your standards. As a result, you’ll quickly get a feel for which operations might be best equipped to share some best practices with the others – and especially worth maintaining a long-term relationship with. You’ll also learn which standards may be too high for even the best performers to achieve, which is always an important reality check for an organization.
And, should you choose to share this comparative exercise with all of your providers and in-house operations, you’ll inspire all of them to step up their game. Granted, it can be humbling for companies to have the particulars of their performances on display for everyone to see. However it’s that kind of visibility that helps keep our industry innovating and moving forward.
Balancing The Kinds Of Attributes You Measure
A good scorecard isn’t just about quantitative achievements such as how many lines a facility has shipped per hour. It’s also a chance to take a closer look at qualitative aspects like a 3PL’s ability to innovate, its willingness to invest in the relationship and how well its personnel interact with your company’s. Often these qualities are just as important – if not more important—in the overall scheme of your company’s supply chain success.
Highlighting Circumstances That May Be Outside Your 3PL’s Control
It’s definitely important for scorecards to call attention to the big-picture activities and performance standards that are most critical to your organization’s success. (For example, one of my company’s clients features the category of “on-time delivery to stores” on every one of its supply chain provider’s scorecards, not just the scorecards of the providers that are actually delivering merchandise to stores.) In this way, all providers become acutely aware of what your most essential success factors are regardless of their position within the supply chain.
However it’s also important not to penalize providers for any low score they receive that may have been caused by something that another supplier or your own company did farther up the supply chain. If, for example, you’re grading a provider’s ability to process outbound shipments on time, it’s only fair to consider having a grade on the scorecard in place that shows how often it received the necessary inbound shipments on time from your company or other suppliers.
The moral of the story: If a certain aspect of your provider’s performance could be been compromised by the poor performance of another player, find a way to make that possibility evident on the provider’s scorecard . If you don’t, you may wind up trying to correct the wrong trouble spots in the wrong places – or penalizing the wrong supplier.
Enabling Automated Updates
Even in today’s fast-paced business world, it’s not uncommon for supply chain management professionals to update data on their scorecards less often than they should – weekly, monthly or even quarterly. Unfortunately this time lag often negates one of the most valuable functions of a 3PL scorecard: enabling companies and their providers to identify and correct minor relationship or performance molehills before they turn into major mountains.
Anything your company can do to automate your scorecarding process so that performance criteria are updated sooner rather than later will serve you well. And if you don’t know where to start, consider this: You may be able to borrow some of this data from other systems that are already capturing it, such as a WMS, labor management tool or E-time program.
Sharing Information In A Simple, Straightforward Fashion
It’s possible to put a lot of time, effort and money into making a scorecard look attractive. But that doesn’t mean it’s always wise to do so – especially if the additional bells and whistles prevent people from being able to quickly and easily interpret the information they’re looking at. One of the most effective scorecards my company uses is actually one of the most basically designed, with colors like green, yellow and red used to quickly convey which activities are making the grade and which aren’t.
For maximum utility, keep scorecard graphics and functionality simple and easy to decipher.
Understanding How Your 3PLs Measure Themselves
If your 3PLs are large companies with multiple operations, the chances are good that they’ve developed some scorecard performance management tools of their own. Don’t miss the chance to take a look at them if you’re presented with the opportunity.
It’s quite possible that their perspective on what is especially important to measure in a supply chain operation may vary from your organization’s, so seeing their scorecards may call your attention to important attributes your scorecard might otherwise overlook. (For example, one of my company’s scorecarding measures is facility personnel turnover, because that can have a significant effect on productivity.)
Not only is logistics a 3PL’s core competency – which means you’re looking at an expert’s view of a scorecard—most 3PLs also have the advantage of having developed their scorecards after years of being scorecarded themselves. As a result, they’ve had a chance to glean ideas from numerous different scorecards and to choose the qualities from each that they believe are truly the best of the best.
About the AuthorPatrick Burnson, Executive Editor Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]
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