Vendor Rating: 2 Proven Metrics to Drive Your Business Profits

Benefits of vendor rating

“Vendor rating is the process of establishing performance categories, and collecting and analyzing data to monitor trends and identify areas for further action.”

In other words, the reasons why we do a vendor rating can be classified as:

1) to gain insights into the supply chain, and

2) drive the overall supply chain performance. Be it reduce costs, reduce lead time, improve product quality, or some combination of these variables.

Disadvantages of vendor rating

Of course, the rated or assessed supplier might feel that they are not trusted by you, and it could even do harm to your supplier relationship if not treated well. But an effective vendor rating always brings far more good than harm, and it’s definitely a great way to rejuvenile your supply chain and drive your suppliers’ performance up to the next level.

Note: Vendor rating shares the same meaning with supplier assessment, vendor evaluation, and supplier appraisal. In this post, we’ll take turns with these terms just to avoid repetition.

2 kinds of criteria for vendor rating or evaluation

It’s important that you establish a rating criteria or system in your organization.

Because in the evaluation process, some factors can be quantitatively measured, and others subjectively. And you need to eliminate the possibility of making too subjective decisions and render the vendor evaluation pointless.

The vendor rating process should also be able to be repeated in your later projects. Better yet, you can create a supplier assessment mechanism that fits your unique needs for your own organization, which would definitely save you tons of time later.

Here are 2 of the most widely accepted vendor evaluating criteria that stand the test of time. Use them as references for your own criteria.

10 Cs

10 Cs was developed from 7 Cs. It’s also known as Carter’s 10 C’s model of supplier evaluation or assessment.

These 10 cs are:

  • Competence – how competent is your supplier in meeting your product and service needs?
  • Capacity – does your supplier have the right personnel, equipment and production capacity to deal with possible market fluctuation?
  • Commitment – how committed is your supplier in your company’s success?
  • Control – how does your supplier manage the supply chain?
  • Cash – is your supplier financially stable?
  • Cost – what are the costs for the products?
  • Consistency– how consistent is your supplier in delivering goods with the same quality?
  • Culture – do you and your supplier have cultural barriers? Have either of you made an effort to overcome it?
  • Clean – how green or environmentally friendly is your supplier?
  • Communication – is the communication between the two parties open and transparent?

If you’re interested in knowing more about it, feel free to go to 10 Cs for supplier sourcing or evaluation for potential suppliers.

As you can see, the 10 Cs model for vendor rating is not exactly a rating checklist. It is, however, a more comprehensive way of thinking about your product and your suppliers.

If you are not sure where to start the vendor evaluating process, 10 cs model would be an ideal start.

7 factors

The above 10 cs mode for assessing supplier stands on a higher ground, guiding you to evaluate your suppliers in a more comprehensive way. The following 7 factors or aspects are more down to earth, and they are more piratical in reality. They are:

  • Business and finance – does your supplier have a sustainable business strategy, and how’s the financial status?
  • Operational capabilities – is your supplier capable enough to deliver you the products or services you need?
  • Supply chain management – how does your supplier manage the overall supply chain? What areas can be improved, and how do they plan to improve them?
  • Research and development and engineering capabilities – how many R&D engineers do they have? How committed are they in R&D?
  • Quality management – scale the quality of the goods produced by them. Take into consideration the consistency of the quality.
  • Manufacturing – how’s the new product introduction (NPI) management? How well do they control the process, and how do they cope with changes in the project?
  • CSR (corporate social responsibility) compliance – do they employ any under aged workers? What’s their policy on overtime work? How responsible are they in protecting the environment?

Summary

To sum up, the above 2 vendor rating systems can be your reference in creating your own supplier assessment criteria. But they are just for reference, and you need to adopt your needs and requirements to make the most of of them.

Not entirely sure how you should assess your supplier? Feel free to reach out, and we’d be glad to help you out.

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