Continuous Vendor Assessment

In the earlier article, we discussed the importance of vendor development and vendor partnership. In this article, we discuss the continuous vendor assessment process in detail.

To identify the right vendor partner for the future, we need to define our expectations from the vendors; we need to practice continuous Vendor assessment, including providing feedback at regular intervals, and help them solve problems and improve performance.

We can start assessing vendor performance, focusing on essential requirements such as on-time supply, quality of products, cost of supplies, and prompt response in every incident or supply.

1. Establish Assessment Criteria

Define specific criteria for each aspect you want to assess. Ensure you have a written communication and agreement on the requirements. As a best practice, you may print the requirements (if they are common) and the assessment details on your Purchase Order.

Most common assessment criteria are:

  • On-time supply (delivery punctuality)
  • Quality of products (meeting specifications, absence of defects)
  • Cost of supplies (competitiveness, value for money)
  • Promptness in response (communication and issue resolution)

2. Continuous Assessment

Collect the above data regularly, preferably on every supply received and assess their performance.

2.1 On-time Supply Assessment

  • For every delivery you receive, track delivery dates against committed dates.
  • Calculate the on-time delivery performance of each supplier using a percentage formula:
  • = 100 – (Received Date – Committed Delivery Date) / (Committed Delivery Date – PO Date)%

2.2 Quality of Products Assessment

  • Define and issue desired product specifications to the suppliers.
    • For example, classify the quality defects and scores like Critical = 0 marks / Major = 25 marks / Minor = 50 marks / Observation = 75 marks / No Deviation = 100 marks.
  • Conduct product inspections or quality checks upon receipt of every batch against the agreed specifications and record the score.

2.3 Cost of Supplies Assessment

  • Compare the vendor’s pricing to industry benchmarks and competitors.
  • Consider factors like total cost of ownership, including shipping and handling fees.
  • Evaluate any cost-saving measures implemented by the vendor.
    • For example, use a scale of 1 (Not Worth) and 10 (More than value for money), then convert it to a percentage score.
    • The Purchase, Quality & Production Dept must assess this parameter jointly.

2.4 Promptness in Response Assessment

  • Track response times for inquiries, concerns, and issues raised with the vendor.
  • Categorize and prioritize responses based on urgency.
    • For example, use a scale of 1 (unresponsive) to 10 (Prompt). Convert to a percentage score.
    • To be assessed by the Purchase & Accounts Dept

You may use a similar template as below.

3. Feedback

  • Regularly update the suppliers about their performance levels and failures and focus areas for improvement.

4. Root Cause Analysis (if applicable) and Continuous Improvement Plan

  • For any identified issue (e.g., late deliveries or product defects), help the suppliers conduct root cause analyses to understand why they occurred.
  • Collaborate with the vendor to develop an improvement plan, addressing any identified issues.
  • Include specific actions, responsibilities, timelines, and measurable objectives.

5. Performance Review Meetings

  • Hold regular meetings with the vendor to discuss their performance and improvement plan progress.
  • Address any challenges or concerns and provide constructive feedback.

6. Maintain Records

  • Maintain detailed records of assessments, improvement plans, and performance data.
  • Generate reports summarizing assessment results, improvement actions, and performance trends.

By following these steps, you can conduct a thorough vendor assessment focusing on on-time supply, quality of products, cost of supplies, and promptness in response. This approach will help ensure that your organization maintains a high standard of vendor performance and delivers value to your business.