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In order to be effective, the actual supplier evaluation must be structured in such a way that it produces information and data that can actually be used to make a decision. If the information the company receives from the completed supplier assessments is vague or ambiguous, then management cannot make any informed decisions based on this information and the effort was effectively wasted. This means that open ended questions or questions that are too long or wordy are often not the best approach for these assessments. The questions should be clear, concise, and designed to elicit responses that can be compared and analyzed. The questions should also be focused enough on the item that they are intended to measure in order to provide accurate data.
Sometimes, supplier assessments are too narrow and are not sent to all of the relevant internal or external people. When conducting supplier assessments based on internal feedback, it is important to include all people that had contact with a supplier or supplier products. This should not be limited to people who are likely to have incentives to give the supplier only a favourable review. Most internal assessments include people in engineering, receiving, purchasing, and other functions of the company. The assessments may try to obtain some different information from these people, but overall, the structure and the KPIs that form the basis of the assessment should remain constant. This will make it easier to compare data over time and across suppliers.
The supplier evaluation should also be easy to fill out. If suppliers cannot understand the questions or the questionnaire/survey is long and difficult to fill out, they may not be as likely to return the assessment. The questions should not be hard for either the supplier or an internal person to understand. They should not contain complex purchasing jargon or excess verbiage. They should be clear and concise. The survey should also contain instructions that explain how to fill out and submit the assessment. It should also have a deadline for completion. These parts of the process can be easier if automation/software is used for this process.
Reviewing Assessment Data
Once there is a mechanism in place to periodically collect performance data from suppliers, the next step is to review the performance data. Ideally, the format that the data is in should lend itself to comparison and analysis. The data should also be in a format that can be quantified and scored. Many companies use a supplier scorecard for this. Moreover, data from different types of assessments like internal surveys, external surveys, and site visits should be incorporated into the analysis. Since most large organizations have many strategic suppliers and lots of data, it is almost impossible to obtain, organize and review data from assessments effectively on a large scale without automation or software.
When evaluating supplier performance data, the two things to look for are large changes in the performance metrics and overall trends. By identifying trends, a company can make projections about where the performance data will be in the future and can take action accordingly. Downward trends and deterioration in performance can signal a problem. Moreover, an abrupt change in performance metrics might signal an imminent problem. However, there could be another explanation. In this case it makes sense to obtain more data from the supplier and to dig deeper to find the source of the problem. It may be a one-time anomaly or it could be something more.
Monitoring supplier performance proactively can ensure that exceptions to policies are tracked and personnel and resources are assigned to address the problem quickly. Alerts and notifications can provide up to the minute information to company personnel letting them know of changes in supplier performance. Having a system that can take the assessment/scorecard data and can output it in a report or other format is helpful because members of the team can all access and review the information quickly and easily.
Taking Action
Once there is sudden drop in supplier performance or a downward trend, it is important to take action quickly. Quick action can reduce the risk of disaster, significant loss, and gives the company the ability to take steps to prevent bad outcomes. Some actions that can be done include communicating with the supplier, conducting further evaluations, developing an improvement plan, or finding an alternative supplier. The actions taken may depend on many factors. These include the supplier’s past performance, level of current performance, strategic importance, possible damages, and overall risk.
