Organisations that evaluate their suppliers find that they have better visibility into supplier performance. A robust and continuous supplier assessments programme helps to uncover and remove hidden costs, reduce risk and increase competitive advantage by reducing order cycle times.
Organisations actively assessing their suppliers will commonly see over 20% improvement in supplier performance metrics (e.g. on-time delivery, quality, and cost).
Conducting a supplier assessment is helpful not only when you are sourcing a supplier, but also for continually monitoring and auditing suppliers you are already working with. Regardless of whether you are already working with the supplier or not, the tips provided in this article can be applied to both scenarios.
Conducting a supplier assessment is key to make sure that your supplier is doing what you expect them to do, and that the other party is delivering what you need. By assessing your suppliers with quantitative measures, you will see where improvements can be made on your suppliers’ side; you can then address them accordingly to improve the overall supply chain performance.
Important supplier aspects to consider:
1. Setting Expectations for Both Parties
When assessing or evaluating your supplier’s performance, both parties must first agree on the critical requirements, timelines, and deliverables of the partnership. Assessing and auditing your suppliers regularly is important for monitoring these deliverables, being able to identify when corrective actions need to be taken, or improvements need to be made. For this, a supplier assessment and measurement system should be in place.
2. Reducing Risk
Companies are dependant on their supply chain and conducting regular supplier assessments will give you insights into the performance and business practices of your suppliers, which is vital information to help you assess and reduce the risk to your business. Risks can be financial and operational, can increase with geographic distance and can also be reputational. By monitoring your suppliers regularly, any changes to their circumstances or operations can be picked up and dealt with as required.
3. Hidden Cost Reduction
By better understanding supplier performance business practices and processes, customers can help suppliers drive waste and inefficiency out of your business, resulting in higher-quality suppliers and lower costs. By introducing a preferred supplier programme, companies can reduce the hidden costs associated with resource-heavy activities, such as: complaint management, additional inspections, buying from multiple sources and see a reduction in bottom-line costs associated with delivery charges, overtime, buffer stocks, obsolete inventory. By measuring and improving supplier performance, choosing a group of preferred and secondary suppliers and by working with supply chain to reduce quality problems, as an example, a company eliminates wasteful steps in its own processes.
4. Increase Performance Visibility
When companies do not know the facts about how their suppliers are performing, supplier management tends to be based on guesswork or personal opinions. Moreover, the simple act of measuring performance can help improve performance. This improvement can be even more dramatic if a Service Level Agreement, with clear performance indicators, has been agreed on and is monitored.
5. Leveraging Supplier Relationships and Capabilities
Companies can better plan new products and services based on a good understanding of their suppliers’ capabilities and performance levels. Also, suppliers can provide technologies to their customers that could help them with a new product or service development, process improvement, ultimately adding revenue to the customer’s bottom line and enhance their competitive position and reputation in the market.
6. Aligning Business Practices
Ideally, organisations would want to choose their suppliers based on the same business ethics, standards of excellence, culture and commitment to continuous improvement. Without any form of service level agreement or supplier assessment programme in place, it would be very difficult to establish, from the outset, if a supplier is a right fit for an organisation. However, with a robust initial assessment and an ongoing evaluation system in place, finding and maintaining a preferred list of suppliers, with whom a long and collaborative relationship will remain in place, is far more likely.
If you would like to streamline your supplier assessment programme, or do not currently have a supplier assessment or evaluation system in place, here is how Activ can help:
collation and monitoring of key information and documentation
For your initial needs, we recommend starting with our Customer and Supplier Manager and Improvement Log modules, but for businesses with more complex supplier management requirements, the Audit Manager, Business Risk Management and Agreements Manager modules would be useful additions to your supplier management toolkit. Our friendly team are always on hand to give advice – speak to one of our experts by requesting a quote and see how Activ can simplify your business processes.
Andy Beverley, Activ’s Group Software Development Director is an entrepreneurial software developer with a solid technical background. This, coupled with a strong entrepreneurial flair has led him to become involved with multiple tech start-ups, one of which was InfoSaaS which later became Activ.
Andrew is the man behind the Activ product in terms of software conceptualisation, design, and development, and is the longest-serving member of the Activ team. Andrew was first employed to create a database for cost management and has previously been directly involved in the production environment of BS5750, prior...
Owen Roberts-Thomas is Activ’s Legal Team Manager. As well as being the man behind the Legislation Outlook, Owen’s team can provide expert legislation-related advice to our Activ Comply clients. Owen’s legal expertise lies in the environmental, health and safety and information security management fields, and...
