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Supplier evaluation

Supplier evaluation helps to measure and monitor your supplier’s performance

How do you evaluate a supplier?

Supplier evaluation is the process of evaluating and approving potential suppliers. It can also be used to evaluate existing suppliers to measure and monitor their performance that will lead to increased value and risk mitigation.

There are three methods you can use to evaluate suppliers which are:

 

Supplier evaluation best practices

Supplier evaluation is a continuous process and it's important that suppliers meet certain standards in their own operations and practices. Below is a step-by-step guide and best practice to supplier evaluation.

  • Develop a high-level plan: Establish cross-functional team members and key shareholders to develop a communication plan. Bring in the financial department too, who will help you to estimate possible cost saving solutions.
  • Develop process plan: Make sure that schedules are set and reported to the relevant departments.
  • Acquire data: Use internal and external data from existing or potential suppliers. Collect and analyse the current procurement process and map out your potential suppliers to evaluate.
  • Evaluate suppliers: Set out a criteria and potential benefits to narrow potential suppliers.
  • Select suppliers: Calculate the actual benefits of the project and communicate with any key shareholders.
  • Implement the project: In your report, include expected results, economic benefits, project procedure and measurement of performance.
  • Measure performance and continuously evaluate: Selected suppliers can be required to gain certification through an appropriate standard setting body.
 

Why is supplier evaluation important?

Evaluating suppliers is a fundamental activity within the procurement team of your organisation. It’s important for suppliers to meet certain standards, to improve their own operations and to ensure they meet your organisations expectations. Supplier evaluation is important because:

  • Well-conducted supplier evaluation can contribute to competency development
  • Supplier evaluation is an essential element that enables organisations to achieve competitive advantage
  • Supplier evaluation is a good way of uncovering and removing hidden waste and cost in the supply chain
 

What is supplier evaluation and selection?

Supplier evaluation is a continual process that involves evaluating and approving potential suppliers. It can also be used to evaluate existing suppliers to monitor their performance, to increase value, mitigate risk and drive improvement. Evaluation can take the form of a questionnaire, interview, or site visit.

Supplier selection is the process of selecting a supplier that is the most suitable to your organisation. It involves assessing the supplier’s capabilities and resources to produce the most optimum results through capacity, technical and financial stages.

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