What Is Supplier Evaluation?
Finding the best suppliers for your company isn’t simple, if it was, no one would struggle so much nor have to conduct several processes in order to determine a supplier is the best option. As a company, we understand this quite well since all businesses have at least one supplier that provides them with some components, parts, products, or maybe service.
Therefore, rest assured that we know what we are talking about and we understand the reason why you are here: because you need to find potential suppliers for your company. To do this, you can approach the matter in several different ways. Some businesses and people overall decide to allow the suppliers to prove themselves.
In a few words, there decide to go for a one-time contract that consists of obtaining some products or the service for a limited period of time. This helps them to determine if the supplier can meet their requirements and needs and if it is an outstanding one for the things the company has in mind. However, this involves having to spend a lot of money and you could end up with products and services that don’t satisfy you at all.
It is true that hiring or making a contract with a supplier always has a small percentage of luck, but you can save yourself time and money by conducting something different or approaching the issue differently. A Supplier Evaluation sounds your right for us for two reasons:
- Because we conduct them ourselves in our company.
- Because you will notice how useful it is once you see and understand what it is all about.
This process is exactly how its name indicates: an evaluation. But, what does it evaluate?
During Supplier Evaluation, the company assesses the suppliers it is considering to hire or employ and determine their potential through quantitative and qualitative assessment. This is a process that can take a lot of time when you are not familiar with the supplier and it is the first time you are considering hiring it. However, it can also be implemented or conducted when you have had a supplier—or several ones—for some months or years.
In this way, you can determine if its performance is still the one from a few years ago or since you started a partnership with it. Or if the performance got even better and can provide you with more benefits than before. And with the benefit, we refer to better products and services.
What does this process evaluate?
Unlike other similar processes such as Supplier Audit, this evaluation is more about going through all the aspects and elements of the supplier. For example, instead of assessing the quality and delivery of the products or services, the evaluation also takes into count the price, production, performance, technical, and many other aspects. So, we can say that it evaluates every aspect of the supplier to determine if it can meet the requirements and needs of the customer or company.
This is a long process that is usually conducted once a year to guarantee that the current and new suppliers of the company are the best option for it. We have had many clients or people like you that ask us if it is truly necessary to conduct this evaluation. And our answer will always be the same: absolutely.
The main reason for this answer is because a company can’t continue with a supplier that isn’t fulfilling its expectations and needs. Imagine having a component or product supplier that is always missing deadlines or the quality of its products got worse instead of better. You can’t afford this and it is necessary to evaluate the rest of the elements and aspects of the supplier to make the final decision of finding a new one or just disposing of it.
Also, this process helps you to reward those suppliers that have been outstanding in their duties. After all, it isn’t all about finding issues and problems but also knowing the good parts about each one of them. Remember that your objective—or one of them, at least—is to create a long-term relationship with a reliable and qualified supplier.
If you want to do this, you also need to give a few things in exchange and make it know you are happy with the results, products, and services it is providing.
What are the main aspects or elements assessed in a Supplier Evaluation?
We mentioned before that every part of the supplier is important during the evaluation. However, this doesn’t give you a good idea of the main aspects you need to evaluate which is more important for you to decide what to do.
Therefore, allow us to give you a quick review of this:
– Quality: this aspect will always be one of the most crucial elements in any evaluation, audit, company, and anything related in the business world, not only when it comes to suppliers and customers. After all the quality of the components, products, and services is almost everything.
– Production capacity: how much can your supplier produce compared to what you need and require?
You need to keep an eye in the capacity of the supplier so you can know if it is able to meet the deadlines and amount of parts or products you need. Or if it exceeds them in the first place. There is a production cycle you have to keep in mind, and in this one, the supplier plays an important role.
– Performance: is it improving or getting worse? Anything is a possibility.
If the supplier isn’t keeping up with the needs and requirements of your company—or it can’t do it since the beginning—that means something is lacking in its performance.
– Risk: how safe is to make a contract with this supplier? Is it financially stable? How about its production?
You have to consider all the risks that come from hiring or going for a specific supplier, especially the aspects that are related to its operations and existence themselves.
As you can see, there is a lot to understand but you will get a hang of it sooner than later. So, don’t worry, you started in the right place.