Jeremy Ferrer
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Evaluating suppliers is an essential step in a company's activities. Indeed, at one point or another, she is led to buy certain products or services. It is therefore necessary for him to choose a supplier carefully. This step is often overlooked even though it is a major lever for the proper functioning of the company and its development. Indeed, the quality of the products or services we buy depends enormously on the quality of the suppliers. Thus, supplier sourcing should not be taken lightly, let alone their evaluation. When it is difficult to source supplies or when the purchases made are of poor quality, this can have negative impacts on the production chain, and therefore on the reputation of the company. Everything is interdependent. To successfully assess suppliers, you need to find the right method to apply, but also the most relevant criteria for evaluating the suppliers that come your way. This step can be a long process. However, it is worth it, as it is the guarantee of your long-term success. In the following few lines, we will talk about the main reasons for going through the supplier assessment stage, and then we will develop the methods to implement it within your business.
A supplier can be a natural or legal person whose main role is to provide goods or services to a business. These depend on the activity of the company. They can also be an intellectual service such as software to be installed in the company's computer network for example.
The supplier is a link in the quality chain in the sense that it supplies it on a regular basis so that there is continuity in its activity. Take the example of an agri-food industry producing canned jams. She sources all kinds of fruit every day in order to be able to produce the quantity of jam set out in her objectives. It is up to the fruit supplier to fulfill its role and to provide a sufficient volume of fruit every day for the industry to meet its goals. Note that a small problem in supply can cause major problems in the production chain. This is why suppliers must go through a strict and objective evaluation stage before being recruited. This task is also called supplier evaluation.
Supplier evaluation is an important part of supplier sourcing. This step must be carried out in compliance with the requirements stipulated by certain entities of the company. For example, technicians and engineers require the raw materials to be of good quality. Those dealing with procurement may require short delivery times so that production can start quickly.
A receptionist may require that the labels be of good quality in order to ensure the packaging of packages. And the list goes on and on. All of these functions may require the services of a provider. The latter can intervene in all the activities of the company. For example, administrative departments may require office supplies. The accounting department may need ERP software and so on. Finding the right suppliers for all of these entities is a job in itself. It must be performed regularly and requires a particular level of expertise in sourcing and evaluation.
Supplier risk assessment is a set of processes for evaluating and approving potential suppliers whose services could match the needs and requirements of your business. This process is both quantitative and qualitative. Its ultimate goal is to be able to finally draw up a list of the best possible suppliers in a specific field.
It goes without saying that when carrying out a supplier evaluation, it is essential to rely on specific criteria that we will develop a little below. It is also important to comply with the standards already in place for the management of external service providers, such as the ISO 9001 standard.
Supplier risk is unavoidable regardless of the level of trust you place in your service providers. However, if you want to develop a continuous and long-term business, it is advisable to do everything possible to reduce these risks as much as possible. That's why you need to conduct a supplier assessment first. Here are some of the benefits you can get from doing this:
Evaluating suppliers doesn't just allow you to assess your performance. Overall, this practice also gives you a clear overview of the situation of your stocks in real time.
Supplier sourcing, through tools such as source to pay or S2P, allows you to create a database that brings together all the necessary information about each supplier. Having these in front of you allows you to better manage this area, to measure the performance and productivity of your company according to the service providers you have recruited. So, for future purchasing projects, you already have an idea of which suppliers to choose at the right time.
A good supplier assessment that leads to collaboration with competent providers inevitably reduces the risks of increased hidden costs in the supply chain. Indeed, as the company better understands the business practices of its supplier, this allows it to better control expenses.
The assessment stage of the supplier purchasing cycle creates a certain competitiveness at the supplier level. This allows the company to have a more objective vision of the potential of the suppliers with whom it has already worked. It also gives it the possibility to expand its database in order to forecast other suppliers to ensure a continuous supply. Commercial and financial risks can thus be reduced, as the assessment takes into account the real needs of the business.
The aim of supplier assessment is not only focused on the business, but also on the suppliers themselves. Indeed, it allows them to evolve in their core business. By being evaluated, they are aware that they still need to make efforts in certain parts of their services. This is good for them in the long run. For a company, the process does not normally end at the supplier risk assessment phase. It must train its suppliers, communicate regularly with them, and help them correct the situation if necessary.
The supplier evaluation phase must be based on certain rules and evaluation criteria. This gives you the opportunity to know the standards in force and to adjust operations according to them. So you don't risk breaking the rules.
Any collaboration with a third party involves risks. It is important to assess them before embarking on a long-term professional relationship. For a company, it is important to detect supplier risks before the start of a collaboration by using supplier assessment stage. Here are the common risks of skipping this step:
Financial risks are more focused on suppliers. These are dangers that your business could potentially be exposed to if you do not conduct a supplier assessment. These risks may be linked to loans that the supplier has taken out and that he is having trouble repaying or to legal proceedings against the supplier. All this could have an impact on the quality of the services it provides and thus naturally on your productivity.
We often talk about eco-responsibility and environmental protection at the moment. These terms must be one of the drivers that makes a business work, a principle that it adopts to participate in sustainability. It is possible that you have already adopted this within your business, unlike your suppliers. These risks have no external signs. They are difficult to detect until you learn from the news that you are working with suppliers that do not respect your ethics at all. Hence the need for a good evaluation of suppliers beforehand to avoid this kind of risk that can damage your reputation.
Data and information about your business should be confidential. Under no circumstances should you entrust their handling to your suppliers. However, there may be situations where they need to have access to this data. Assessing the supplier purchasing cycle gives you an idea of their identity and their ethics in professional life, and therefore allows you to trust them or not. These risks are not always linked to bad intentions. Sometimes data breaches are just the result of bad handling. Regardless, it's a risk for your business.
In addition to these three risks, there are also other risks such as those related to the computer system or compliance. To reduce these risks, you should insure the E sourcing suppliers by setting up a good evaluation of them.
Now you are ready to take up the challenge and embark on the supplier assessment stages that come your way. To do this, you need to follow these few steps:
We consider it to be the most important step in the process because you can't assess an entity if you don't have any criteria to rely on. Once the criteria forsupplier evaluation are defined, you will give a score of 0 to 5 for each supplier based on these criteria.
But before that, you should also weigh each criterion according to how important it is to you. It should be noted that each company has its own criteria. A criterion may not be important for one company while it is important for another. Also, be aware that each supplier can be evaluated differently depending on their field of intervention.
Here are the general criteria you should use when evaluating a supplier.
You need to take a close look at how competitive the supplier is in relation to the price they are offering. But it can also include the question of its finances in its entirety. Is it stable in relation to its financial flows? Can it compromise on terms and payment systems? Is his price fair and has the real value of what he is selling?
Of course, quality is among the most important criteria when choosing a supplier. This must therefore be taken into account when evaluating the supplier. How does he manage the quality process within his company? Also, try to find out about the material resources he uses. Is it able to ensure the same quality, even for a large volume of orders?
When evaluating a supplier, you should also consider whether the time frames they are offering are advantageous compared to those of another supplier. Also try to read testimonies or opinions that talk about its seriousness and reliability.
It should be noted that there are two types of supplier evaluations, namely an a priory evaluation and an ex-post evaluation. The first relates to the supplier qualification phase, i.e. an assessment of supplier risks, while the second is rather intended to assess the quality of the services it provided as well as its performance after the order has been placed.
Before starting to assess a supplier, first define your needs and goals. Ask yourself the right questions: what exactly do you want to assess? Do you need to assess all suppliers or just those you don't know well?
Once the needs are identified, consider determining the means you will use to carry out the supplier sourcing and assessment stages. Set deadlines so you don't spend too much time on this task. Determine what constraints there may be. Set the budget that the company can allocate to it. Choose a person who can successfully complete this project.
This step is crucial since it is on the basis of a questionnaire that you will have to assess your suppliers. Decide in advance whether you are going to ask open-ended or closed-ended questions. Regardless, these should cover everything you need to know about the provider in question. You should test the supplier evaluation questionnaire before you start.
Note that you will also have to determine whether you will conduct a systematic evaluation of all suppliers or on an ad hoc basis according to your needs.
Sharing the results of the assessment allows your suppliers to get involved in this process. The aim is to strengthen the relationship of trust between you. There are various methods for sharing the results of a supplier evaluation. The first consists in asking internal collaborators about the reliability of the supplier. The latter can then give its opinion on the results. The advantage with this method is transparency.
The second method consists of a self-assessment by the supplier. Based on certain criteria, it measures its own performance. This method has the advantage of involving the supplier himself in the sourcing & purchasing.
In all cases, you need to put in place an effective strategy in order to be able to communicate easily with your suppliers and talk to them about the results.
Any quality assessment process in an enterprise, regardless of its activity, must meet certain standards. In the case of supplier evaluation, we are talking about the Iso 9001 standard, which frames all the steps to be taken if the company wants to comply with the rules.
According to this standard, the pre-assessment of the ISO 9001 supplier involves a visit to the supplier's premises. During this time, a supplier evaluation form must be completed by him. It will contain information that one needs to know about him. He will therefore receive a score that qualifies him for the next stage or not.
In some cases, it is possible that the company can request samples from the supplier that will allow the supplier to evaluate its service or even its products. If she is not satisfied with it, a future collaboration will not be possible. However, these suppliers may still ask to be re-evaluated after carrying out the necessary adjustment actions.
Generally, it is up to the company's purchasing manager to take care of sourcing or evaluating suppliers.
For all your needs in procurement outsourcing, BME (Buy Made Easy) is your best ally if you are looking for a professional to work with you for the long term. As mentioned above, supplier analysis is an essential step and an important link in procurement sourcing. By using experienced companies such as BME, you can be sure to carry out this process, which is sometimes time-consuming but essential. BME takes care of all the administrative procedures for your type C purchases, including sourcing. Moreover, concerning this, the company has an S2P software that allows it to optimize this operation. To increase productivity, call on the expertise of BME and entrust us with supplier evaluation and all your procurement outsourcing projects.
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