In-depth Analysis

Why Fashion Companies Are Enthusiastic About Supplier Scorecards

This tool can help establish more transparent purchasing relationships and better measure supply chain metrics.

Published on October 17, 2024

Transparency is critical in the fashion industry, which often faces issues such as overproduction, human rights violations, and unethical sourcing practices.

As consumers and regulators increasingly demand more sustainable and lower-emission products, fashion companies are becoming more reliant on assessing and documenting their operations and impacts, along with those of their business partners, according to Sheng Lu, a professor at the Fashion & Apparel Studies Department and Director of Graduate Programs at the University of Delaware, in Supply Chain Dive.

Supplier scorecards can be an important tool for achieving this transparency.

By using these scorecards, fashion companies can obtain standardized data that is cost-effective to gather and easy to analyze, experts told Supply Chain Dive. Scorecards also facilitate consistent and transparent discussions on measurable performance among brands like Patagonia.

“We prefer them because other options may be more subjective, making it harder to measure performance accurately and objectively over time,” said Elisabeth Mast, Director of Sourcing, and Wendy Savage, Director of Social Responsibility, Traceability & Animal Welfare, in Supply Chain Dive.

Selecting the Right Metrics

Scorecards can help companies create successful supplier partnerships by providing feedback pathways to improve relationships and align goals, according to Robert Conradt, Vice President of Procurement and Manufacturing at Brooks Running.

For this athletic equipment company, scorecards are a superior alternative to informal feedback shared during quarterly business meetings, which have proven less effective than scorecards.

Instead, Brooks uses an internal scorecard to rate the performance of its first- and second-tier footwear suppliers across eight categories, including manufacturing quality, responsible sourcing, and sustainability.

Conradt noted that the company chose metrics most relevant to Brooks’ business and values, a process that took years to develop. Each metric measures performance over an entire calendar year or two product seasons (spring and fall).

Our supplier quality team first defined our internal key business requirements, determined how to measure these needs, then identified measurable parameters in suppliers that impact or relate to these needs to develop scorecard inputs.

Daniel Dowd, Vice President of Supplier Quality at Estée Lauder

However, Conradt pointed out that Brooks’ internal procurement practices may make it difficult for suppliers to comply with social and environmental laws, regulations, and their own codes of conduct.

To address this issue, Brooks collaborates with the non-profit Better Buying Institute, allowing suppliers to anonymously evaluate buyers’ purchasing practices, including demand planning and forecast accuracy. Brooks reviews these assessments to identify areas needing improvement.

Similarly, cosmetics manufacturer Estée Lauder uses supplier scorecards to measure multiple factors, including quality, service, innovation, and sustainability performance, according to Daniel Dowd, Vice President of Supplier Quality at Estée Lauder, in Supply Chain Dive.

“Our supplier quality team first defined our internal key business requirements, determined how to measure these needs, then identified measurable parameters in suppliers that impact or relate to these needs to develop scorecard inputs,” he said. These metrics help the cosmetics company monitor its value chain to assess risks and opportunities for improvement.

Patagonia also uses supplier scorecards to evaluate production quality and social and environmental impacts, according to Mast and Savage. “It is important for us not to measure performance in isolation.”

For this outdoor apparel company, this means assessing on-time delivery rates, defect rates, social and environmental audits, and efforts toward renewable energy.

Implementation Details

Supplier scorecards require a unified system for sharing data and information. Creating such a framework can be challenging, but fashion executives say the key to successful implementation is transparent communication.

For example, Patagonia had to determine how to develop strategies that provide effective feedback, whether face-to-face or via email. By taking a thoughtful and transparent approach, the company often encounters little resistance and has opportunities to support areas needing improvement.

“These systems collectively enable us to have complete conversations—we are not just evaluating them; they also provide areas for our own improvement,” said Mast and Savage.

Some companies use different approaches when launching supplier scorecards. For example, Estée Lauder combines one-on-one supplier reviews, town hall meetings with suppliers, and information assessments in the supplier portal.

“These systems collectively enable us to have complete conversations—we are not just evaluating them; they also provide areas for our own improvement.”

Patagonia executives Elisabeth Mast and Wendy Savage

However, compliance remains a challenge.

Patagonia noted that they had to work with suppliers twice on-site to resolve issues.

While many suppliers are eager to improve and address problems, some struggle even with support. In cases where the relationship is not aligned ideologically and threatens product quality, companies may choose to discontinue working with a supplier.

Filling Gaps

Despite being popular and often successful procurement strategies, supplier scorecards are not perfect. According to Lu’s research, even large American fashion companies sometimes lack the ability to collect sustainability data beyond their first-tier suppliers.

This can lead to inconsistent data quality, especially in the absence of industry standards and due to data complexity, according to Lu.

However, there are available solutions: third-party audits and sustainable certifications.

“Scorecards help us understand and evaluate supplier performance in a tangible, consistent, and scalable way.”

Daniel Dowd, Vice President of Supplier Quality at Estée Lauder

Earlier this year, outdoor apparel and accessories brand Cotopaxi completed a remediation project with its first-tier suppliers following a third-party audit in 2022 that found the supplier engaged in unethical recruitment practices. To address this violation, Cotopaxi and other brands using the same supplier hired a third-party auditing and remediation consulting firm to help manage risks.

Other companies opt for online scorecards and rating platforms like EcoVadis. For instance, Estée Lauder uses this platform to assess suppliers’ ESG development, identify areas for improvement, and manage ESG risk, according to Mindi DeLeary, Vice President of Global Responsible Sourcing, Sustainability & Upstream Procurement.

While some companies have made progress, the path toward a sustainable and ethical fashion supply chain remains long. However, supplier scorecards can be useful tools in this process.

“Scorecards help us understand and evaluate supplier performance in a tangible, consistent, and scalable way,” said Dowd of Estée Lauder.

Source: Supply Chain Dive