Supplier Assessment: Watch Out For These 7 Key Areas

Supplier assessment, synonym with supplier evaluation, supplier audit and supplier appraisal, refers to the procedure of measuring and monitoring your supplier performance, with the goal of reducing costs, mitigating risks and improving supplier performance.

In some context, supplier assessment could refer to the strategic sourcing for a supplier. Here in this post, we mainly focus on the assessment when you’re already engaged with your suppliers, i.e. it’s a critical part of supplier management.

Why assess your suppliers?

Proper and effective supplier assessment allows you more insight into your supplier’s performance. From there, you can see whether there are areas to be improved in the supply chain, and if the production efficiency can be improved. That said, assessing your supplier is essential in driving your supplier’s performance and helping you win the competitive edge.

Read Supplier Assessment and Evaluation: Why is it Important? if you’re interested in knowing more about this.

When to do the supplier assessment?

Supplier assessment is time and resources-consuming, because the process requires joint-efforts and consensus from both your side and that of the supplier’s. It’s not uncommon that a single on-site supplier assessment could take up to a week to finish, from the assessment preparation meeting, to the submission of the final audit report. This is why it’s crucial that you do the supplier assessment at the right time. It includes:

  • when you, as one of the project stakeholders, are the last one to know what happened in the production site due to lack of communication;
  • when there are a lot of sudden unforeseeable changes in the project process;
  • when you’re not sure if your supplier is capable of providing you with what they’d promised;
  • when you struggle to effectively manage your suppliers;
  • when you see on-going co-operation potential from the current supplier, and would like to know for sure that you’re making the right call.

In a nutshell, the right time to assess suppliers is closely related to your project situation, your project goals and your relationship with your suppliers. It’s an important decision to make, so take your time.

Why is supplier assessment always challenging?

With what being said, just the thought of how costly it’d be to assess your suppliers is daunting enough, not to mention that you still need to provide constructive feedback to your supplier to improve the overall supply chain performance. Another challenge would be lacking of proper supplier assessment mechanism, be it the assessing tool, proper procedure, or professional assessors. Without them, the assessment won’t be of much help.

To sum it up, the challenges lie in:

  • lacking assessing mechanism;
  • lacking professional engineering assessors to identify key problems to solve;
  • requires time and energy from many parties;
  • needs to provide workable solutions to drive the supplies performance.

If you’re not sure whether you should assess your suppliers, or how you should assess them, feel free to reach out, and we’d be more than happy to help out. See what we can do.

What should be assessed?

Different from the timing for supplier assessment, which is based on your needs, the key areas that assessors evaluate are more or less the same. Click to read the Supplier Assessment Sample Report if you’re interested.

Here are 7 of the key areas that you should pay extra attention to:

1) Business and finance situation

It includes how your supplier’s business is run, for example, if they have clear business objectives, and how well are the objectives executed, the situation about the IP protection strategy, and their financial situation.

2) Operation capabilities

It includes how their facilities are managed, how the resources are allocated and how the demand management goes. This usually requires on-site visits and assessment, because the company protocols might not be fully executed by the staff.

3) Supply chain management

It includes materials management, supplier selection, supplier management, logistics, and cost reduction.

4) R&D and engineering capabilities

It includes how many engineers they have in the R&D department, and in what sectors do they serve, what R&D tools do they use, and the general process and procedures they adopt for the R&D.

5) Quality management

It includes what quality system do they use, how do they monitor the incoming materials, how do they run the quality control plan, how do they improve continuously, and more.

6) Manufacturing

It includes the NPI (New product introduction) management, process control, and traceability of all parts in the production.

7) CSR (Corporate Social Responsibility) compliance

It includes assessment concerning the employees themselves, for example, if the staff are protected by official labor contract, if overtime work are paid at additional rate, and assessment on the working environment of the organization. For instance, if fire protection and exit gates are well-maintained. It also includes the social responsibility assessment. For example, if the chemical waste are treated as required by local law.

For a more detailed supplier assessment procedure, feel free to visit Supplier Assessment.

If you’re struggling to drive your supplier’s performance, or you’re not sure where to start to assess your supplier, feel free to reach out. We’d be glad to help.

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