Effective IT is integral to business success, so carefully managing IT vendor relationships which can often be quite costly is vital to profitability and operational functionality. IT managers need to gauge how well new technologies will serve business goals. Following this pragmatic approach regarding IT purchasing or outsourcing will help you forestall potential risk.
Because the services IT vendors provide often give them access to sensitive company information, they constitute a special supplier category. Vetting these particular vendors calls for a high level of scrutiny. To keep IT vendor assessments on track and maintain the ability to make apples-to-apples comparisons, use the categories built into this IT vendor risk assessment and scorecard template.
You can also add categories that are more relevant to your organization. Use vendor risk scorecards to make a purchasing decision or to monitor ongoing engagements. These scorecards allow you to quantify the potential downside of IT and other high-risk suppliers who may disrupt or otherwise negatively impact your business.
Once you identify those risks, you can decide if a vendor meets your standards; you can also ask a vendor to remove a risk that you consider unacceptably high. This vendor risk assessment template presents a series of questions that you can adjust to suit your specific situation. To facilitate decision making, the template also provides a space to assign risk. Excel PDF.
Vendor scorecards that focus on meeting strategic goals like KPIs can form a competitive advantage for organizations that use them to manage multiple suppliers and complex domestic and international supply chains. Suman Sarkar, Partner at 3S Consulting and author of The Supply Chain Revolution: Innovative Sourcing and Logistics for a Fiercely Competitive World , sees the power of solid supplier relationships as uniquely tied to organizational success in a global economy.
Vendor scorecards can serve as a strategic tool by virtue of their very existence. The Hawthorne effect states that when people in this case, vendors know they are being observed, they modify their behavior.
In other words, when vendors are aware of scorecard monitoring, they do their best to adapt or change their actions to meet expectations and gain approval. It can often be difficult to determine the ideal KPIs and metrics for your company. Then, use the scorecard to quickly review existing operations. Such a review will serve as a starting point for a gap analysis, which will help you understand goals and what you need to improve.
Blokdyk uses seven dimensions, and each dimension can include a few hundred guided questions. The answers to these questions auto-generate RACI scorecard diagrams, along with action steps. The scorecard points out which areas require attention. While your team may not generate hundreds of questions, these steps will help you and your internal stakeholders create a roadmap to establish strategic goals and corresponding metrics. Whether you are comparing prospective vendors or evaluating current suppliers, you can capture and use this information to quantify and simplify your evaluation and decision-making processes.
The scorecard should act as an incentive, rather than a penalty, for suppliers. To quantify vendor performance, many organizations develop equations to generate hard data. Here are a few examples to help with your scoring efforts:. Sometimes, using qualitative assessments to evaluate vendors can be more challenging than using strict quantitative measures. But, qualitative measures can also increase your chances for success. As competition accelerates, businesses may be vulnerable if they favor quantitative measures like cost cutting over qualitative ones, like innovation or other soft considerations.
When companies operate in the short term, buyers who have the incentive to maintain the status quo or merely generate an incremental improvement turn away opportunities; others simply leave those opportunities off the table.
Use this list to add to your scorecard or to begin discussions about criteria that works for your company:. A focus on cost metrics and finite saving goals often hurts business prospects.
A vendor key performance indicato r is a measurable value that demonstrates how effectively vendor performance is propelling a company to meet its strategic business objectives.
After all, the driver is the first and last person that an employee interacts with on a daily basis. You would then translate these KPIs into a scorecard that measures performance on a monthly basis. Weighting or assigning value to vendor scorecard metrics is the act of assessing the impact of each measure on the overall business. If you want your vendor management program to add value to your organization, make sure that your vendor evaluation looks beyond the requirements of a standard or regulation.
For example, you acknowledge a supplier's competence by awarding a new program. Gustafson offers a weighting scenario based on percentage and illustrates how it can change over time, depending on business conditions:. Each of these four categories will include some performance measurements that feed into them. In a year when a company faces financial headwinds, it may shift a higher percentage of its overall grade to YOY cost reductions. In a fast-paced innovation environment, you can weight the scorecard more toward new product ideas or improvements.
Evaluators assign the score based on the established scoring criteria. Pros: As the name suggests, simple scoring is fairly straightforward. For lower value, lower stakes projects or an RFP lite you can save time using simple scoring. Cons: This scoring approach gives the same level of consideration to every question.
The weighted scoring approach enables you to prioritize different elements of your RFP based on their importance to the business. For strategic sourcing RFPs, this scoring model enables a clearer picture of which vendor offers the best long-term value. Generally, weighted scoring is the preferred approach for most procurement professionals. Pros: You can fully customize the value of each question and section of the RFP.
Consequently, sharing this information with your vendors enables them to dedicate more time and attention to the areas of the RFP that are most important to you. Cons: RFP weighted scoring is admittedly more complex than simple scoring. If done manually in spreadsheets, there is some risk of miscalculation. However, RFP management software automates this process, making it quick and easy.
To explore weighted scoring in more detail and see examples, visit the blog: Weighted scoring demystified. Indeed, much of the supplier selection process is determined during the requirements discovery phase of the RFP process.
Ideally, your established requirements create the foundation for your RFP scorecard. So, as you gather all your key stakeholders ask them to list the requirements that are most important.
Your stakeholder group should include colleagues from different areas of the business. For example, it may be wise to engage the impacted department, finance, legal, operations and IT. After you categorize your list of RFP requirements, you must determine the importance of each to decide which RFP scoring approach is best.
Then, you can skip the rest of this step and begin writing RFP questions to gather the necessary data. Then, assign the overall category with a weight. Now, write the RFP questions to uncover the information you need to make a decision. As you do, determine how to score the question. Do the same for multiple choice questions, assigning middle values as needed.
For open-ended questions, identify several potential answers for your most important questions. These example answers should cover your ideal response, an acceptable response and an unacceptable response. Whether you have two evaluators or 10, they each bring their own unique perspective and experiences to proposal scoring.
The variety of views is both an advantage and a potential roadblock to reaching a clear decision. Having multiple scorers reduces the risk of missing important considerations.
This deployment option lends itself to a greater degree of ownership—and therefore customization—making it an attractive method for established businesses with the resources to handle such an undertaking. On the flip side, this can delay implementation time, complicate critical software updates and other maintenance, and handcuff businesses craving future agility.
Cloud-based deployment is hosted and maintained by the vendor or outsourced to a third party, and the system is typically accessible through any device with a web browser.
Though less customizable, cloud-based software typically offers greater stability and security—especially for small businesses that lack the staff to manage data internally. This will likely appeal less to small and midsize businesses and more to enterprises seeking both the accessibility of the cloud and the customizability of on-premise. In the 21st-century software arena, mobility reigns supreme. The proliferation of smartphones and the internet of things IoT spawned new and better forms of digital communication, giving businesses a flexible companion to desktop systems.
Operating systems are the software running on your desktop computer or laptop. Odds are, your business uses either macOS, Windows, or Linux—and there are plenty of software options available for all three. But the underlying design of these three operating systems differ drastically, which means vendors must build different versions of their software for different systems. In other words, be sure to verify OS compatibility before you buy.
Mobile compatibility comes in two forms: a stand-alone mobile app and mobile-browser accessibility. Some vendors offer full functionality through a mobile browser like Chrome or Safari, while others are limited to only essential or specialized tasks—and the same is true of mobile apps. IoT integration includes mobile access, but it goes much further. While the full potential of this technology has yet to be unleashed, finding a vendor that prioritizes IoT could pay dividends in the future—and extend the life of your investment.
So you might not need CRM software on your refrigerator today. But in five years, who knows? Here are some things to look out for:.
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