Using effective supplier appraisal techniques to improve the supply chain.

Suppliers can have a significant bearing on the success of an organization and businesses can introduce a number of problems through inadvertently using poor or inappropriate suppliers. Issues can include poor quality goods, ineffective delivery schedules and poor service levels which can all impact the procuring company in varying degrees. For many organizations protecting the supply chain through effective sourcing is a key task. The management of this is usually achieved through the implementation of an approved supplier list coupled with an effective appraisal system.

The reason behind an approved supplier list is simple enough, the list comprises the suppliers that are “approved” to be used and have passed through some form of assessment. The approved suppliers list acts a control for the buying community to ensure that only suitable suppliers are used. Evaluation therefore acts as the initial stage in identifying organizations with suitable controls and capacity that can supply the desired products or services.

Whilst there is no standard evaluation method there are several areas that should be considered, as a result supplier appraisal often includes criteria to ensure the supplier is:

• Technically sound
• Managerially competent
• Adequately resourced
• Financially stable
• Competitive (often in terms of price and availability)
• Reliable
• Provides goods of suitable quality
• Environmentally/Ethically sound

Each factor can be weighted according to their importance to the procuring company.

From time to time new organizations will need to be added to the approved supplier list and an appraisal is carried out. There are two typical methods of obtaining evaluation information:
• Questionnaire
• Supplier Visit

It should be remembered that obtaining accurate information can sometimes be tricky and due time and resource should be committed to the evaluation process. This should involve a range of personnel from the buying company who are stakeholders in the material being procured. This may typically involve the QA dept but should be extended to manufacturing and/or engineering teams. Another crucial aspect is that an effective process is required to capture new suppliers (prior to an order being raised) and to prevent use prior to appraisal.

While supplier evaluation should be seen as a critical process it is not without problems. Evaluation can be resource intensive and can create a bottleneck between the supplier and buyer this is especially true where evaluation data is difficult to obtain.

For most organizations appraisal is a continuing process and becomes part of an integrated supplier management process. Thus the appraisal process may be carried out intermittently, often on an annual basis to ensure that once a supplier is added to the approved supplier list to ensure its performance against the appraisal criteria is maintained.

The advantages to running an evaluation program are various and include –

1. Poor supplier are weeded out prior to use
2. Identified weaknesses of suppliers that are approved can be targeted by improvement programs
3. Each organization gains understanding over potential influencers of the relationship
4. Company spend can be leveraged on approved suppliers
5. Customer service levels are secured

Supplier appraisal is one activity which supply chain teams undertake that can have real bottom line fiscal impact. Get it wrong or have none at all and the business can find itself aligned with improper suppliers, ineffective goods and impractical delivery schedules – get it right and the organization can be positioned with suppliers who are focused and tuned alongside the needs of the business.

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