Introduction

Supplier Evaluation assumes utmost importance in the current scenario of global purchasing. Every Organization (especially manufacturing organizations) needs to have an evaluation matrix or model in place.

Companies who evaluate their suppliers find that they have better visibility into supplier performance, uncover and remove hidden cost drivers, reduce risk, increase competitive advantage by reducing order cycle times and inventory, gain insight on how to best leverage their supply base, and align practices between themselves and their suppliers.

Companies pursuing supplier assessment commonly see over a 20% improvement in supplier performance metrics (e.g., on-time delivery, quality, and cost).

What is a Supplier Evaluation?

Supplier evaluation refers to the process of evaluating and approving potential suppliers by quantitative and qualitative assessment. The purpose is to ensure a portfolio of best in class suppliers is available for use.

It is also a process applied to current suppliers in order to measure and monitor their performance for the purposes of reducing costs, mitigating risk and driving continuous improvement

Supplier Evaluation diagram

Approaches and Methods

There are different methods and approaches to carrying out a supplier evaluation with emphasis on CSR practices. Some examples include questionnaires, scorecards, site visits and third-party standard certifications.

A number of organizations such as EcoVadis have developed evaluation tools and methodologies to help companies perform Supplier Evaluations. The objective of the EcoVadis supplier evaluation is to assess the quality of a company’s CSR management system-through its policies, implementation measures and results.

The process captures and analyzes information and distills it into a scorecard with a Rating on a 0 to 100 scale. Read about best practices on supplier sustainability evaluations in this blog post: Best Practices For Supplier Sustainability Evaluations

Learn more about the EcoVadis evaluation process, the methodology behind it and how all this is integrated in a simple, easy to read scorecard in our guide

Download the guide

Benefits

  1. Increase performance visibility. When companies do not know the facts about how their suppliers are performing, supplier management tends to be based on guesses. Moreover, the simple act of measuring performance can help improve performance. This improvement can be even more dramatic when companies award additional business on the basis of suppliers meeting performance goals.

 

  1. Uncover and remove hidden waste and cost drivers in the supply chain. The supply chain is full of potential risks that can originate from suppliers in regards to CSR. Some of these risks can be avoided by better communications between customers and suppliers. By better understanding supplier performance and supplier business practices and processes, customers can help suppliers drive waste and inefficiency out of the business, resulting in higher-quality suppliers and lower costs.

 

  1. Leverage the supply base. By measuring supplier performance, an enterprise can set a threshold for its suppliers that can lead to higher-quality results. Companies can better plan new products and services based on a good understanding of its suppliers’ capabilities and performance levels.

 

  1. Align customer and supplier business practices. Ideally, suppliers should run their business in alignment with their customers: share the same business ethics, expect similar standards of excellence, show commitment to corporate social responsibility and continuous improvement

 

  1. Mitigate risk. Insight into supplier performance and business practices helps reduce business risk, particularly given companies’ increasing dependence on its key suppliers. Risks can be financial and operational and increase with geographic distance.

 

  1. Improve supplier performance. The goal of supplier evaluation should be supplier performance improvement. While simply measuring performance has a positive effect, supplier evaluation can be most effective when it leads to continuous improvement activities and actual supplier performance improvement.Follow-up activities, such as supplier training and development, and corrective actions to address supplier evaluation findings are the best ways to obtain measurable and positive results.

Are you looking for tools to evaluate the suppliers in your supply chain base and improve their performance? EcoVadis helps thousands of companies like yours to evaluate and improve  their supply chains. Contact us to learn more!

Request a consultation