- What the Walmart Supplier Performance Scorecard is
- The components that make up the Scorecard
- How to decipher the report
Most suppliers have heard of the Supplier Performance Scorecard, often referred to as simply the Scorecard. However, the Scorecard is complex, and suppliers sometimes have trouble understanding this document and why Walmart puts so much weight into it.
In this article, we are going to create the Scorecard and dive into the various components. We’ll discuss what each element means and why it is essential for suppliers to understand its implications fully. Lastly, we’ll talk about the importance of assessing the success of your Walmart business.
What is the Supplier Performance Scorecard?
The Scorecard is a report that attempts to grade suppliers’ performance from Walmart’s perspective. It is not simply an indicator of how many products Walmart consumers purchased, though sales are one crucial component. Instead, the Scorecard looks at the individual components that work together to ultimately determine if Walmart made any positive margin when the consumer purchased these products.
Before we dive into creating the Scorecard and breaking down the individual metrics, it is vital to understand the main components of the Scorecard and what they mean.
Major components of the Scorecard
There are dozens of metrics displayed in the Scorecard across multiple time ranges. However, though the document might seem confusing, we can group all of the metrics into three major categories: sales, profitability, and asset efficiency.
- Sales Volume: Sales may seem the most important and obvious of all metrics. After all, the entire purpose of a supplier’s efforts is to sell its products to consumers. Sales volume is a good metric to consider in the overall analysis of the account, but what if the consumer purchased many products only because Walmart sold them at a deep discount? That would make sales volume high, but Walmart’s margin and profitability very low.
- Profitability: The profitability metric refers to Walmart’s profitability, not the supplier’s. As we will see on the upcoming Scorecard example, the report displays many different margin metrics. The report shows the ultimate metric as the “Maintain Margin,” referring to the margin remaining after any store markdowns. In other words, did Walmart make any money when the consumer purchased the product?
- Asset efficiency: Asset efficiency is how efficiently Walmart handles the supplier’s products, which are ultimately the retailer’s assets. Some of the Scorecard metrics that constitute asset efficiency are unit and retail turns, store weeks of supply, instock percentage, and average inventory at cost.
While all of the above categories are important on an individual basis, the combined impact of all three results in the Gross Margin Return on Inventory Investment (GMROII) metric. We will dive further into this and other metrics a bit further on in this lesson. However, let’s first build the report in Decision Support.
Building the Supplier Performance Scorecard
The Scorecard is a simple report to create. The user only needs to provide a filter to define the scope of the data returned by DSS. The report template is in the Scorecards and Summaries folder in DSS. Click on the template named “Supplier Performance Scorecard” to build this report query.
The screenshot below shows an example filter that suppliers can use. In this example, we are simply using the 6-digit vendor number. However, suppliers can run a scorecard for various other filters such as item-, department-, or fineline-level, plus many other options.
Once you have selected your desired item filter, click on the Submit tab and click Run Now to submit the report for processing by Decision Support System.
Deciphering the Supplier Performance Scorecard
Let’s take some time and explore the various components, and how they fit into the three categories we detailed earlier.
The Scorecard presents a year-over-year comparison of all performance metrics in various time ranges, as seen below.
- Last Week shows performance data for the previous Walmart week. The numbers in parentheses denote the Walmart week associated with this column group.
- Month shows performance data for the current Walmart month-to-date. The numbers in parentheses denote which Walmart weeks DSS includes in the current Walmart fiscal month.
- Year shows performance data for the current Walmart fiscal year-to-date. The numbers in parentheses denote which Walmart weeks DSS includes in the current Walmart fiscal year.
- Quarter shows performance data by Walmart fiscal quarter. The numbers in parentheses denote which Walmart weeks DSS includes in the various Walmart fiscal quarters.
This section details the various Warehouse metrics, as applicable. Note that suppliers whose items are flow-through, also known as assembly, distribution, will not see data in this section. Walmart warehouses never own assembly items; the retailer merely transfers them from supplier trucks to Walmart trucks destined for the various aligned stores.
- Ships At Cost is the cost value of the inventory that the supplier has shipped to Walmart stores.
- Warehouse Turns is the ratio of warehouse sales to average inventory carried. At the warehouse level, a sale is simply a shipment to the various Walmart stores.
- Warehouse Weeks on Hand is the estimated number of weeks of inventory currently contained in Walmart warehouses. DSS derives this number from the Walmart store forecast.
- Cost On Hand is the cost value of the inventory currently in Walmart warehouses.
- Cost On Order is the cost value of all open warehouse purchase orders.
Walmart associates all of the metrics in the Store section with the various stores. The following are the most critical metrics in determining Walmart’s return on its inventory investment, or GMROII:
- Sales is the total consumer purchases of the supplier’s items in retail dollars. This number reflects any applicable markdowns.
- Cost Dollar Inventory is the cost value of all stock at the store level. This number indicates the amount of money that Walmart has invested in the supplier’s items.
- Maintain Margin % is the margin remaining after any store markdowns.
- GMROII is the gross margin return on inventory investment. If there is a true score on the scorecard, this is it. This number is the ratio of gross margin to the average inventory that Walmart carries at cost. Similar to unit turns, GMROII represents how much money Walmart made as a function of inventory investment. The margin used in this metric is Maintain Margin, not Initial Margin, since GMROII represents the actual money realized by a consumer purchase.
These metrics are also important to consider:
- Retail Dollar Inventory is the retail value of all inventory at the store level.
- Repl Instock % is the percentage of replenishable stores with sufficient inventory on hand to meet forecasted consumer demand.
- Unit Turns is the ratio of consumer purchases to average inventory at cost. This ratio effectively denotes how many times Walmart turns a block of inventory into a consumer purchase.
- Store Weeks on Hand is the estimated number of weeks that the current store inventory will last, based on the sales forecast.
- Initial Margin % is the difference between retail value and cost, divided by retail value. Commonly referred to as markup.
None of the metrics on the Scorecard exist in isolation, as they are all interdependent. Merely looking at consumer sales does not provide a picture of profitability or asset efficiency. In other words, sales metrics simply tell the supplier how much Walmart customers purchased. They don’t speak to whether it was a profitable sale or how long it took to realize that sale.
Some items will have high sales volume but low margins. Some items will sell quickly but in low volumes. Some items will sell low volumes but at high margins. It is only by looking at all of these metrics together that suppliers can truly understand the importance of each metric in defining the success or failure of their Walmart business.
Fortunately, the SupplyPike Retail Intelligence application breaks down the Supplier Performance Scorecard into an easy-to-digest format, allowing quick insights without the analysis paralysis!
The best part? You can get started today for free!