Rating and Evaluating Suppliers and Vendors: Benefits and Best Practices

What is supplier assessment or evaluation?

When you are to buy a car, what would you do first? I’m assuming comparing the car models, prices, and services online so you get the best deal possible. Well, that goes the same in the supply chain when you are to find the ideal supplier manufacturing your product.

You may need to send out a request for quotation (RFQ) and a request for proposal (RFP) for the potential suppliers to fill in, and then you need to decide which supplier to choose with information you get. At this stage, it’s crucial that you have a supplier assessment system to help you fast decide who to go to.

But this is not where the supplier assessment ends. As the product development process continues, you’ll see that the supplier assessment system can also help you monitor your supplier performance, and thus reduce costs, mitigate risks and improve the overall performance of the supply chain.

Why do you need to assess or evaluate your suppliers?

The main reason to assess or evaluate your suppliers should be to mitigate risks, in various forms. And there are other advantages and benefits as well. Here are some of them:

1) Mitigate risks

As mentioned, the supplier assessment system allows you to monitor and keep tracks of the supplier performance. Such insight and visibility into the supplier performance, including the prime and sub-tier suppliers, and business practices help you, at a large scale, anticipate risks before they occur, and mitigate them with appropriate actions when they happen. With the increased visibility, you don’t have to guess whether the suppliers are doing what they should in the supply chain.

2) Reduce costs

You won’t believe how much money and time is wasted on inefficiencies in the supply chain. Such hidden waste could be obsolete inventory, overtime, buying from unqualified sources, and quality issues brought by poor business practices on the supplier side.

With the supply chain performance being crystal clear with the help of supplier assessment system, you can uncover the hidden waste and cost drivers in the supply chain, and remove them granted that you take the correct actions. This is how effectively assessing your supplier help to reduce the operating costs.

3) Improve supply chain performance

The overall goal for supplier evaluation is to improve the supply chain performance, which indicates lower costs, less risks, better staff performance, and better supplier relationship.

With the help of the supplier assessment system, not only will you be able to measure the supplier performance, to take it to the next level, you can use the information you have to drive the actual supplier performance improvement.

For example, you can find out the root-cause of the unsatisfying performance from your supplier, and you want to take corrective actions so as to make things right, findings from the supplier assessment system would be of great help.

How can you assess or evaluate your suppliers?

As much importance as supplier assessment is, it does take a considerable amount of resources, including human resources, to get it done. Without the right resources, it’s hard for you to get the later job done right. However, not all organizations are big enough to have a dedicated department for it, so we can consider taking other approaches.

1) Questionnaires

Sending out questionnaires to your suppliers seems like an intuitive way to assess and evaluate your supplier performance. But it could give rise to many problems as well.

First off, it requires you to know what you want to know, and what the quantitative measurements are. Moreover, it’s usually hard for you to connect the dots in the results given back to you, and it takes time to make actionable plan, if not at all. Not to mention that your suppliers might not be on-board with you, or they are looking for things other than supplier training and development.

2) Scorecards

Compared with questionnaires, scorecards saves you time from having to integrate the data. But the downsides are also obvious: it takes more resources to compile a scorecard, and the results you get won’t help you create an action plan or find you the root cause of the problems, just like questionnaires.

3) Site visits

Another widely accepted method to assess suppliers is to do a site visit. But to make sure that the site visit is effective, you must have the trained personnel who have the expertise to evaluate. Apart from that, the whole supplier assessment process could be inconsistent, which would make the assessment process harder to scale, rendering the site visits almost close to pointless.

4) Supplier assessment software

Our supplier assessment platform allows you to keep track of your supply chain performance every step of the way. You have absolute visibility into your suppliers and spending. No matter what your supplier types are,  where do you prefer your suppliers to be, which stage you’re in the project process, you have all the information  you need to decide what’s best for your business.

Feel free to reach out if you need to know more. We’d be happy to help.

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