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How to assess supplier performance? An extensive guide on supplier evaluation

Is your supplier as good as you think? Learn how to assess it with our simple guide: In just a few steps, you can take a huge step in your business value.

The relationship between companies and their suppliers is an essential factor affecting the quality of a final product or service. Finding a first-class supplier can often be a long and difficult process, but it’s not impossible. Through the proper selection of parameters, such as capacity, prices, reputation and more criteria, everyone can find their “ideal partner” with whom to reach the climax of good manufacturing.

On the other hand, the first crush of love can soon end… and have serious consequences. Supplier failure and miscommunication can create big problems for a company. Be it production blockages, sales cancellations or even having to use an emergency communication plan due to poor manufacturing.

We can see constant cases of this nowadays, such as the recent problem at Jersey Dairy, who had to reduce sales of fresh milk cartons after their supplier was unable to make two deliveries, reports the BBC. Shortages of one type of carton meant that some supermarket shelves were empty in early July. Now they are relying on the help of a new supplier to help them meet their targets.

No business wants to live through the drama, insecurities and stress these situations involve. It is therefore important to always anticipate any hypothetical problems. The following topics will be discussed below in order to help you find your perfect match straight away:

1. How to evaluate suppliers

2. General evaluation criteria

3. What if the evaluation is negative?

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Evaluation and evolution of suppliers

In order to avoid failures and to reach the fullness of the production chain, the most efficient companies evaluate their suppliers with audits. These can be used to decide whether to initiate, maintain or terminate a contractual relationship with a supplier, or whether to change it. The aim is to determine whether corrective or preventive actions are required in order to avoid affecting the customer.

The evaluation of suppliers through this method allows you to set the selection criteria and to determine their level of importance. It also makes it possible to compare offers, prices and to establish a list of potential suppliers. Or add proposals from suppliers for changes in the relationship, and address the level of involvement.

Nowadays, it is very common to see companies becoming more environmentally friendly and trying to maximise green impact as much as possible. Whether it’s to improve awareness (or to protect themselves from public opinion), we see constant changes in their raw materials in search of the most sustainable option. H&M, for example, based its latest collection on the use of water-saving materials during production.

Similarly, Barclays Corporate Banking division published a report in February which found that between January 2021 and January 2022, a fifth (21%) of the UK’s largest retailers cancelled contracts with suppliers for failing to meet environmental, social and governance (ESG) standards.

All this is the result of an exercise in observation and action. With audits, data collection and analysis methods are improved, therefore, the efficiency and effectiveness of future decisions are also improved. This tool will allow you will allow you to examine the following points.

General evaluation criteria

In addition to the above examples, there are other general evaluation criteria that can be adapted to any type of company:

The first of these is the general profile, a concept that is divided into the matrix of prestige, history, reputation and track record of the supplier. These criteria can say a lot about the future experience that awaits you.

Another criterion to take into account is the quality/price ratio of the service and product offered. There is no point in having low quality goods if you really want to offer consistency to the consumer, nor is it any good if they arrive unreliably. Therefore, delivery times, return policies, communication processes, dispute resolution, among other things, are a necessity.

Is the capacity of your supplier adequate for your requirements? The infrastructure and the technical and operational capacity to be able to deliver on time and on budget is very important. In order not to create serious incidents or disruptions in the supply chain, for example.

Finally comes flexibility, an indispensable factor in terms of adaptation or last-minute requests. After all, we must always be aware of spontaneous changes, and thus see the possibility of reaction and effectiveness of a resolution. Therefore it is important to ask yourself how flexible your supplier can be, should the need arise.

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But… What if the evaluation is negative?

In both business and personal relationships, communication is the key that will open many doors. Whether it is to fix problems, find solutions together or… Confirm the need for a break-up. Above all, don’t be discouraged, you can always find someone better!

However, before breaking the bad news, consider whether or not your provider is really dispensable. In many cases, the change involves a lot of time and money and, in the worst case, you may be the only one with such a service or product.

Let’s not forget similar cases such as the famous gas supplier in European countries. This is also something that could have been avoided with a good risk analysis and a better understanding of alternatives should the unexpected happen.

In any case, the important thing is to be aware of what your situation is and to assess in a technical way how your organisation operates. Starting with the quality of the first stage, the search for the perfect supplier, you can gradually improve every aspect of your company until it becomes an example to follow.

As the Chinese philosopher Lao Tse said, “a journey of a thousand miles begins with the first step”. Dare to take that first step!

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