Given the number of tasks that any business has to undertake, simply to survive, it can be tempting to take short cuts and cut down on the number of issues that have to be dealt with. In fact some businesses are tempted to either not evaluate their suppliers or are tempted to cut down on the follow up activity when performance is known.

Managing supplier risks

Perhaps the most single compelling reason for evaluating your suppliers is because to do so helps to manage your risks. Like it or not, the majority of businesses are dependent on the continuous and smooth flow of supplies and if this flow is interrupted, problems will soon appear.

Suppliers all face risks, with environmental problems, defects or lack of materials, lack of cash flow etc all threats to the flow of supplies. It is impossible to reduce the risks to zero, but through continuously evaluating the performance of the supplier you can take sufficient action to keep the risks at bay.
The evaluation process gives you dialogue with the suppliers, to that you can be aware of the potential risks and then manage them. If you do not evaluate, it is probable that you will only know the full extent of risks after a major problem has occurred!

Fewer Defects

Increasingly customers who do evaluate their suppliers indicate that the process leads to fewer defects within the supply chain. This is due to the fact that the increased communication with the customer helps the supplier understand exactly what the customer needs and what does and does not work in practice, so that processes can be improved to reduce the potential for defects.

Better Co-ordination

Although managing risks is important, there are more positive benefits to be had from supplier evaluation. One of these is that evaluations help bring about better co-ordination between the supplier and the customer. Thus the customer is able to give the supplier an indication of when extra supplies may be required, well in advance and the supplier can learn just how the customer operates and any issues that may not be serious, but could be eliminated to improve efficiency.

This co-ordination also leads to the supplier being better placed to meet the business objectives of its customer.
So instead of working separately, the evaluation process enables suppliers and customers to work together and in tandem.

The supplier and the customer will also learn how to align and then integrate practices, processes and procedures to enable joint working to be even more consolidated. Thus it is an important tool to assist in creating a joint working relationship.

Evaluations As Incentives

Although the days of the supplier being very much dominated by the customer have long gone, the evaluations can act as an incentive for the supplier to implement new procedures or tasks that they can then present at the evaluation, It is not a stick to beat the supplier with, more a way of galvanising the supplier into action, keeping it constantly focussed on the need to ensure that its data and information are all current and updated and so on.
Improved Paperwork

Supplier evaluations also seem to iron out any problems with the administration involved, such as invoices or delivery notes etc. This reduces the cost of administering the supply of goods and therefore makes it more efficient.

Retaining The Competitive Edge

Evaluating suppliers’ performance can therefore be a very useful tool that leads to a better working relationship, fewer defects and problems with regard to the supply chain, as well as overall efficiency savings and cost reductions.

Comments

3 Responses to “Why evaluate supplier performance?”

  1. 10 Tips for Cost Savings On Your Supply Chain : supplychain-mechanic.com on July 7th, 2010 9:33 pm

    […] Always ensure that you implement supply chain performance ( such as Supplier performance) management techniques. This may seem as if it will take up some time, which it will initially, but […]

  2. 10 Tips To Managing Difficult Suppliers : supplychain-mechanic.com on July 17th, 2010 10:00 pm

    […] communicate, communicate! If you simply seethe behind closed doors and do not communicate your supplier performance issues with the supplier then you will not have the chance to resolve the issue. So the main thing is to […]

  3. Basil Dlamini on June 24th, 2011 2:39 pm

    I am working in warehouse and Logistics

    I need to measure / evaluate the performance of Procurement or Purchasing department pertaining the serice they provide.

    I also need to measure supplier performance in terms of delivery / service provided

    Please can you help me on the focal points I must focus on in terms of evaluating
    Supplier performance in delivering the goods and services.

    How do I evaluate our Purchasing / procurement department in terms of maximum performance.

    Regards
    Basil

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