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Supplier Evaluation

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What is a Supplier Evaluation?

 

Supplier evaluation refers to the process of assessing and approving potential suppliers by quantitative and qualitative assessment. The purpose is to ensure a portfolio of best in class suppliers is available for use.

It is also a process applied to current suppliers in order to measure and monitor their performance for the purposes of reducing costs, mitigating risk and driving continuous improvement.

 

Approaches and Methods

 

There are different methods and approaches to carrying out a supplier assessment with emphasis on CSR practices. Some examples include questionnaires, scorecards, site visits and third-party standard certifications.

A number of organizations such as EcoVadis have developed assessment tools and methodologies to help companies perform supplier assessments. The objective of the EcoVadis supplier assessment is to assess the quality of a company’s CSR management system-through its policies, implementation measures and results.

The process captures and analyzes information and distills it into a scorecard with a Rating on a 0 to 100 scale.

Read more about why procurement organizations engage in sustainability assessments: Five Reasons Why Purchasers Are Engaging Suppliers in Sustainability Assessments

 

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Benefits

  1. Increase performance visibility. When companies do not know the facts about how their suppliers are performing, supplier management tends to be based on guesses. Moreover, the simple act of measuring performance can help improve performance. This improvement can be even more dramatic when companies award additional business on the basis of suppliers meeting performance goals.
  2. Uncover and remove hidden waste and cost drivers in the sustainable procurement. The sustainable procurement is full of potential risks that can originate from suppliers in regards to CSR. Some of these risks can be avoided by better communications between customers and suppliers. By better understanding supplier performance and supplier business practices and processes, customers can help suppliers drive waste and inefficiency out of the business, resulting in higher-quality suppliers and lower costs.
  3. Leverage the supply base. By measuring supplier performance, an enterprise can set a threshold for its suppliers that can lead to higher-quality results. Companies can better plan new products and services based on a good understanding of its suppliers’ capabilities and performance levels.
  4. Align customer and supplier business practices. Ideally, suppliers should run their business in alignment with their customers: share the same business ethics, expect similar standards of excellence, show commitment to corporate social responsibility and continuous improvement
  5. Mitigate risk. Insight into supplier performance and business practices helps reduce business risk, particularly given companies’ increasing dependence on its key suppliers. Risks can be financial and operational and increase with geographic distance.
  6. Improve supplier performance. The goal of supplier assessment should be supplier performance improvement. While simply measuring performance has a positive effect, supplier assessment can be most effective when it leads to continuous improvement activities and actual supplier performance improvement.Follow-up activities, such as supplier training and development, and corrective actions to address supplier assessment findings are the best ways to obtain measurable and positive results.

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