Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Supplier Assessment: Empowering Innovation and Relationships
Key take-aways
- Supplier assessment involves a systematic evaluation of a supplier’s capabilities and suitability to meet a company’s demands.
- It is crucial in making well-informed decisions in supplier selection and sustainability.
- Frequent assessment helps identify and mitigate potential risks, reducing disruptions in the supply chain.
Conducting supplier assessment and evaluation is paramount to business success. Organizations in the field do this to identify potential bonds and relationships, performance monitoring, and assess the overall quality of goods and services offered.
In this article, we’ll discuss the definition of supplier assessment, its essence, methods, and how it impacts businesses.
I have created a free-to-download editable supplier relationship management scorecard template. It’s a PowerPoint file that can help you assess your supplier’s performance effectively. I even created a video where I’ll explain how you can use this template.
Whatis Supplier Assessment?
Usually, through a systematic evaluation of the supplier’s capabilities and across-the-board suitability to meet a company’s demands, business leaders are able to study what necessary actions are to be done to strengthen supplier relationship management.
As a pillar of the procurement process, it is also the foundation of its excellence. It simply paves the way for businesses to make well-informed decisions when selecting and sustaining supplier bonds which will ultimately affect the performance of the supply chain in its entirety.
Supplier Assessment’s Essence
Is ensuring and maintaining supplier relationships really important for a business to run, even in the evolving lens of the field? Here are some points to keep in mind!
1. Minimizing Risks
Frequent and constant supplier assessment mitigates potential risks of non-compliance and financial instability. By doing this, business experts are able to identify should there be concerns to raise or situations and room to improve. With minimal risks, companies are also able to minimize or avoid any disruption in supply chain management.
2. Guaranteeing Quality
Acquisition of products for long-term supplier relationships may not ensure quality and consistency of the delivery of end-products all the time. Thus, by ample assessment of the supplier’s quality management guarantees that all your company’s terms and conditions are met.
3. Promising Collaboration
Supplier evaluation also fosters innovation for both the buyer and supplier because it encourages both parties to succumb to the business objectives to success and harness ideas for constant development.
4. Reputation Management
Building partnerships with ethically-inclined suppliers also build a company’s brand image and advocate trust among stakeholders and customers. Customers from the supplier and the company may be won over by both ends and create a network of loyalty.
5. Cost Efficiency
Jumping from one supplier to another and jumping from one buyer to another is a headache because it would include rounds of formal and legal negotiations yet again, and therefore, are costly. Evaluating the supplier’s cost-effectiveness fortifies the business the best value for investments and opens doors for the best deals too. This also promotes cost optimization that leads to overall increased revenue and profit.
How Supplier Assessment Impacts Business Operations
Efficient supplier assessment promises excellent and smooth business operations. It ensures a robust supply chain management that is capable of handling economic uncertainties.
By having to source high-performing suppliers, you are able to have access to best-value products and services which leads to amplified customer satisfaction. Procurement teams may also negotiate for the best deals to optimize cost efficiency and bolster financial performance.
You may also gain a competitive edge when innovating with the right suppliers. Through your collaborations, a great example of improving competency is the boost of great ideas for new products.
Furthermore, you may be able to spot and address potential risks that could lead your business to pitfalls. Because of strong partnerships and great supplier assessment, you reduce the possibility of compliance issues and delivery inconsistencies.
SupplierAssessment Methods
Before evaluating your supplier’s performance, you should first be able to assess what your company needs from them. Will they be able to meet your requirements? Are they of superior quality? Do their offers promote customer value?
These questions are only a few of what you need to note upon making sure that your supplier is able to do their end of the deal, bound by legal documents. There are different ways to do that and let us discuss a few of them.
You can be able to analyze your supplier’s performance based on key performance indicators (KPIs). You should be able to answer your questions about whether they are consistent with delivery, the number of defect rates, and even their responsiveness throughout the negotiation. The biggest question that needs to be answered is: Do they provide value to my company?
Evaluating their financial capabilities and capacities is another way to assess your suppliers. As much as you are careful in financial control to make sure you can weather the economy’s unpredictable highs and lows, you need to make sure your supplier is as well. Good suppliers are often stable and credible.
Search them up! Researching your supplier is not stalking, rather, it is a form of security check whether they fit and comply with the industry’s standards. On-site visits are welcome too! In that way, you are able to physically evaluate the supplier’s facilities, equipment, and processes to take action should they pursue striking a deal or not.
In relation to researching, doing frequent reference checks is encouraged. Getting feedback from third parties, especially previous partners of your supplier offers an unbiased lens on their performance and capabilities. As a bonus, you may be able to find out their techniques and strategies as well in bagging the best deals possible.
Lastly, conjuring up criteria to score your supplier is not bad at all. Through this, you can systematically and accurately assess your supplier’s adherence to sustainable initiatives, social responsibility, and ethical practices. They should be able to align with your procurement tactics.
Supplier Assessment Process
The process of supplier usually goes like this: Identify Evaluation Criteria → Identify Suppliers → Collect Data → Scoring → Feedback and Improvement. We’ll explore these!
1. Identify Evaluation Criteria
Outline evaluation criteria to specify your requirements, goals, and standards.
2. Identify Suppliers
Make a list of potential suppliers based on location, relevance to your business industry, capabilities, and reputation.
3. Collect Data
Gather all information related to their overall performance. You may do this by studying performance reports, site visits, financial reports, and customer feedback and references.
4. Scoring
Assess each supplier on your list against the criteria you made. Assign numeral scores and rankings to measure propriety.
5. Supplier Feedback & Improvement
Providing constructive feedback to suppliers is important. Let them know in which areas they can improve to meet what you require and open negotiations for collaboration. Then, set terms and conditions and nurture a mutually beneficial relationship.
Bonus: Supplier Assessment Criteria
In order to better evaluate your potential suppliers, here’s a short rundown of what you may need to assess them:
1. QCD
Quality, Cost, and Delivery or QCD are the top 3 things you need to look at when assessing your suppliers. Make sure that they can deliver you quality products at the best value and at the agreed date.
2. Convenience
You would not source products that are miles away from you at the potential risk of delays. You have to make sure that they are able to deliver quickly.
3. Flexibility
Aside from quick and hassle-free deliveries, you should also evaluate should your suppliers be able to meet your business needs. With the market’s instability, your suppliers should also be fluid in terms of productivity rates.
4. Responsiveness
Communication is key. Rate your suppliers by how responsive they are throughout the negotiation process. It will show you how important communication is for them.
5. Social Responsibility
As a business owner, you surely have values that you keep up. However, some suppliers may not share the same outlook as you have for the society and environment. In this criterion, you would be able to see if your potential suppliers align with your values in managing a business.
Conclusion
Supplier assessment is a foundational cornerstone of a successful procurement. Excellency in this matter is beneficial to both you and the supplier. You are able to procure the best and high-end goods and services you need while also giving your supplier the opportunity to grow and improve on their end.
Furthermore, embracing this evaluation as an integral part of your business operations will empower strong fundamental bond management with suppliers and will pilot smooth advancement in the wide web of business.
Frequently asked questions
What is supplier assessment?
It is a systematic evaluation of the supplier’s capabilities and across-the-board suitability to meet a company’s demands, business leaders are able to study what necessary actions are to be done to strengthen supplier relationship management.
How does supplier assessment impact business operations and competitiveness?
Supplier Assessment has several impacts on business operations. It ensures robust supply chain management, minimizes risks through constant evaluation, guarantees quality assurance, and fosters collaboration and innovation between buyers and suppliers. This assessment also aids in reputation management and cost efficiency.
What are the key methods and criteria for conducting supplier assessment?
Supplier Assessment can be carried out through various methods, including analyzing key performance indicators (KPIs), evaluating financial capabilities, conducting on-site visits, and performing reference checks. When assessing suppliers, key criteria such as Quality, Cost, and Delivery (QCD), convenience, flexibility, responsiveness, and social responsibility play a significant role.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
