Building a Business Case for Sustainable Procurement: A 5-Step Guide
Benefits of Conducting a Supplier Evaluation
1. Increase performance visibility. When companies do not have data on how their suppliers are performing, supplier management tends to be based on assumptions. The simple act of measuring performance 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 sustainable procurement. Sustainable procurement is full of potential risks that can originate from suppliers with regard to CSR. Some of these risks can be avoided through better communication between customers and suppliers. By understanding supplier performance and their business practices and processes, customers can help suppliers reduce waste and inefficiency. This not only improves supplier performance but also lowers costs for customers.
3. Leverage the supply base. By measuring supplier performance, an enterprise can set a threshold for its suppliers that can yield higher-quality results. Companies can develop new products and services based on a better understanding of their suppliers’ capabilities and performance levels.
4. Align customer and supplier business practices. Ideally, suppliers should run their business in alignment with their customers by sharing the same business ethics, pursuing similar standards of excellence and committing to sustainability and continuous improvement.
5. Mitigate risk. Insight into supplier performance and business practices helps reduce business risk, particularly given companies’ increasing dependency on key suppliers. Risks can be financial or operational, and increase with geographic distance.
6. Improve supplier performance. The goal of supplier assessment should be to evaluate supplier performance and improvement. While simply measuring performance has a positive effect, supplier assessment can be most effective when it leads to continuous improvement activities that demonstrably enhance supplier performance. 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.