Eliminating Counterfeit Parts and Materials: Supplier Scorecards

The best way to protect yourself from enemies is to surround yourself with friends. But how do you turn your suppliers into friends? How do you ensure your suppliers are trustworthy, low-risk and reliable?

Much has been written about supplier scorecards and their usefulness in evaluating a supplier’s value to an organization, though few directly address counterfeit prevention.

One can compare supplier scorecards to other collections of metrics. For example, since the 1970s, American football has used a relatively simple formula to calculate a quarterback rating. It’s a function that weights good outcomes (like completions, yards, and touchdowns) vs. bad outcomes (like interceptions).

But this method is limited in that it only evaluates passers, and says nothing about leadership, ability to scramble, or many other factors that contribute to a quarterback’s success.

An alternative “Total Quarterback Rating” system which purports to address these shortcomings has been proposed by the ESPN sports network. But the new proposal is far from optimal, requiring much more data input, and reportedly spanning 10,000 lines of computer code.

Supplier scorecards exhibit some of these same characteristics. Either they can be too simplistic and bear only a loose correlation with success, or they can be too complicated, which makes them costly to maintain and difficult to interpret, especially when the results are counter-intuitive.

There is no universally agreed upon list of supplier performance metrics, so designing one that works for your business requires careful consideration of what’s important in order to meet your goals. Even the definitions of “good” and “bad” outcomes should be considered carefully. For example, if a supplier reliably meets your demand requirements but occasionally delivers suspect counterfeit parts or materials, how should they be rated? The answer… it depends.

If your goal is to eliminate counterfeit parts and materials, then your supplier scorecard should go beyond price, capacity, on-time deliveries, defect rates, etc., and evaluate such indicators as:

  • Supplier’s delivery rate of counterfeit parts or materials. Consider not only your own experience, but monitor other industry reports as well.
  • Supplier’s own anti-counterfeit measures in its up-stream supply chain, such as testing and inspection procedures, and reporting policies.
  • Supplier’s completeness and responsiveness to requests for information.
  • Supplier’s product marking standards.
  • Supplier’s ability to document the full chain of custody of all its products.
  • Supplier’s ability to document the country of origin of all raw materials in its products.
  • Supplier’s return and remediation policies.

Also, don’t be too impressed by a supplier’s participation in any particular industry group. Sure, their participation may raise their ability to fight counterfeiting, but if they are learning anything, it ought to be demonstrated in their performance.

A simple scorecard can be developed by multiplying the relative importance of each factor to your business by the supplier’s performance (either objective or subjective) relative to that factor. Both the importance and performance can be expressed on a scale of one to ten. And the factor scores can be added for total evaluation, much like a quarterback rating. Be sure to track performance over time so you can identify trends, both good and bad.

More sophisticated scorecards also consider supply disruption risks, importance to branding and other factors. But even very sophisticated scorecards may not ensure success. So, whether adopting score cards for the first time, or modifying them to help prevent purchase of counterfeit parts and materials, it may be wise to opt for transparent simplicity, rather than complicated analyses.

Learn more about implementing best practices in Supply Chain Management.

Photo Credit: Steve Snodgrass on Flickr (CC BY 2.0)

This entry was posted in Best Practices, Supply Chain Management and tagged , , , , , . Bookmark the permalink.

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