In business, supplier evaluation is a systematic assessment comparable to rating, which is intended to evaluate the performance of suppliers or service providers on the basis of previously defined characteristics. It is mainly carried out in the business-to-business and business-to-administration relationship by the supplier’s customer. This is where companies or public administration assess their suppliers. In the area of business-to-consumer, an assessment of service providers, retailers, retailers or mail order companies is carried out by consumers as part of the online assessment. However, the latter has a lower objectivity and a higher frequency of errors than supplier evaluations.
Within the operational function of procurement, supplier management and supplier relationship management deal with supplier evaluation. The supplier evaluation is intended to make the performance of the suppliers transparent and comprehensible and serves as the basis for the supplier audit. The aim of supplier evaluation is to select suppliers in a targeted manner. In just-in-time production, it is essential to adhere to the most accurate delivery times, so delivery quality and service levels are important.
Evaluation Criteria
The supplier evaluation is carried out with the help of certain evaluation criteria that are important for the evaluation of the supplier. Evaluation criteria are static factors such as delivery and payment terms, market shares, market power, market behaviour, pricing policy, bargaining power, product and service quality, as well as changing factors such as customer requirements, customer orientation, readiness to deliver, ability to deliver, Delivery quality, delivery time, delivery reliability or service level. Details such as the handling of inquiries can also be included in the rating.
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The terms business indicators, criteria and characteristics are often used interchangeably. The selected characteristics relate to the customer’s goals, so-called Key Performance Indicators (KPIs). In practice, criteria from cross-functional areas are often used. The areas of technology, logistics and quality, as well as purchasing, are often to be found. The innovation potential of the supplier is also partially taken into account. The criteria can be quantitative or qualitative. In practice, the reference level of supplier evaluation is often the individual material groups.
Common criteria for supplier evaluation include the ppm rate of the parts supplied, the price, the payment terms, adherence to quantities and deadlines, and the supplier’s ability to innovate. The first criteria are objective in nature and relatively easy to measure, whereas the ability to innovate is a subjective variable and therefore more difficult to measure.
Other subjective factors mentioned in the business literature are, for example, cooperation behaviour, organisational commitment and communication. These are then usually measurable in all areas of the company. The determination of the key figures is system-based. There are different solutions on the market from different providers.
The assessment should be carried out on a regular basis and aggregated in a specific form of reporting. The reports are used for both the operational and strategic management of the procuring company. In addition, reports can be generated that provide the supplier with transparency about the service provided and enable him to derive measures. Both quantitative and qualitative methods can be used.
