Management & Development Center

                  

 About Us | Our Services | Training | Consulting |

M&DC /

عربى

 Suppliers  Assessment

 

Contents

  • Alert the market (if it exists) to potential requirement (Early Market Engagement)

  • Take initial soundings on feasibility, capacity, capability, approach and level of interest (Market sounding)

  • Business Aims and Critical Success Factors CSF

  • The relative Priorities of the Requirements (e.g. quality of service more important than innovation)

  • Actions to ensure Stakeholders Awareness of these priorities

  • High-level Criteria for both quantifiable and non-quantifiable items

  • A framework for evaluation Procedures and Evaluation Plan for each stage of selection

  • Evaluation Models (Templates)

 

a. Company Requirements Listing (Material, Equipment, Services)

b. Specify the Product Characteristics in terms of one of the following:

  • Physical, chemical, metallurgical specifications and acceptable tolerances;

  • National standards (buyer's own country)

  • Other country's standards

  • International standards (e.g., ISO International Organization for Standardization);

  • Market grades;

  • Industry standards;

  • Manufacturer's own standard

  • Brand name; (add the words "or equivalent")

  • Manufacturing process specifications;

  • Drawings (engineering);

  • Samples:

  • Performance specifications;

  • Acceptance tests;

These characteristics should be communicated to the potential supplier

c. Possible options to satisfy the Company requirements

  • Open tendering

  • Limited tendering

  • Negotiated purchases

  • Long-term contracting

d. Locating Sources of Supply

See PQQ Pre-Qualification Questionnaire and QUESTIONS FOR SUPPLIER ASSESSMENT

a. Management and Organization

  • Background Information, Identity and Ownership, Principal Activities (past and present), Ultimate Parent Details, Organizational Chart, Contractor/Sub-Contracting Approach, Professional/Commercial Affiliations

b. Business & Manufacturing Capability

  • Skills and experience of key staff and Training

  • Work in hand and the availability of Resources

  • The use and management of Sub-Contractors

  • Quality Accreditation, documentation and procedures

  • Technical Ability (supplier reliability and dependability) to fulfill Quality specified by the buyer based on:

    • Quality of Input Material

    • Quality of Technology Input (durability, productivity and product's life span)

  • Production Facilities

    • Adequate Manufacturing facilities in relation to the scale and size of the purchase contract

    • Relatively Modern Equipment

  • Technical Support

  • After-Sales service

    • Well Developed After-Sales Services

    • Proximity of Service Centers

c. Experience and Track Record

  • Principal Activities and Experience Type and Range of Services Offered

  • Whether the required services represent Core Activity

  • Experience over the last three years in similar services

  • Work conducted in collaboration with other suppliers, if relevant

  • The proportion of relevant services routinely subcontracted

  • References from selected Current Customers. ...

d. Legal

  • Professional Indemnity Insurance, supplier’s involvement in any contract disputes or court action

e. Financial

a. Suppliers Assessment

  • More detailed evaluation criteria  Questions for Supplier Assessment (OGC)

  • In addition to the prequalification questions Award stage Assessment focuses on:

    • Technical understanding

    • Proposed Management Processes

    • Risk Management & Risk Transfer

    • Supply Chain Management

    • Relationship Management

b. Bid Evaluation

  • Offer Responsiveness to meet all the buyer's Requirements

c. Cost & Price Analysis

  • Price Analysis: with market price New York Mercantile Exchange, The Chicago Board of Trade  , London Metal Exchange

  • Profit Analysis

  • Total Cost: includes acquisition, transportation, duty, brokerage fees, cost of quality, cost of accounting practices, cost of late delivery, and cost of customer support

  • Life Cycle Costing: The real cost for a product, encompassing materials, installation, maintenance, anticipated repairs and necessary monitoring

  • Net Present Value NPV: takes into consideration

    • Year wise total costs including costs which the buyer will have to incur in the specific years in which these costs are incurred and at what rates

    • Year wise value of output (revenue) in the specific years in which  they occurred and at what rates

    • Salvage/scrap value of equipment at the end of its service life

d. Cost & Price Analysis

  • Treatment of Minor Deviations

    • May be accepted provided that the product meets the basic performance and operating specifications

    • Acceptable deviations should be quantified in value terms to  help in adjusting bid prices and in making them comparable for evaluation purposes.

  • Treatment Major Deviations

    • May be accepted if:

      • The buyer's specified requirements are not sufficiently precise and clear.

      • Different suppliers may have alternative technologies to offer which meet the same need.

    • Merit-point system

      • Points out of 100 are allocated to different technical features depending on how close a feature is to the buyer's
        ideal conception of it.

      • The price quoted is divided by the total score, giving the price per point for that bid.

      • The one with the lowest price per point is identified as the best evaluated bid.

e. Time Analysis

  • Validity period

  • Delivery schedule

  • Time and the procurement of equipment

f. Commercial Analysis

  • Payment terms

    • Timing of Payment

    • Mechanism of Payment: By commercial letter of credit (L/C) - By documents against payment (D/P)

  • Long manufacturing cycle and progress payment

  • Credit terms

6. Ongoing Assessment (Evaluation of existing suppliers)

a. Categorical Plan or model (Judgmental)

  •  Each department in a buying organization, based on experience, forms views on the reliability and/or dependability of a supplier.

  • Suppliers may then be graded as: "good", "satisfactory" and "not satisfactory"

  • Applicable when the number of suppliers is limited and the and volume of transactions small

  • The involvement of the different departments concerned ensures the evaluation is not biased

b. The Weighted Points Plan

  • More objective evaluation and is particularly suited to a quick decision on sourcing for emergency and/or small value imports.

  • It can evaluate different suppliers for only one attribute, or many criteria such as: reliability, dependability and competitiveness and taking into account performance with regard to other attributes such as delivery, service and price, in addition to quality.

  • Weighted Points Steps:

  1. Define evaluation factors  are usually considered are: Quality, Delivery and Service (Price is often evaluated at the time of awarding the contract)

  2. Assign weights to each of these factors, based the relative importance of each for a given product, as follows:

Attribute 

Weight 

%

1. Quality

W1

50%

2. Delivery

W2

40%

3. Service

W3

10%

Total

100%

  1. Analyze the past performance of all the suppliers in regard to these attributes

  2. Combined together into a composite rating using the weights already allocated at the time of setting the criteria for ranking

Attribute 

Weight

Supplier AA

Supplier BB

Supplier CC

Quality

50

.50 x 80 = 40.00

.50 x 75 = 37.50

.50 x 87 = 43.50

Delivery

40

.40 x 87 = 34.90

.40 x 84 = 33.60

.40 x 84 = 33.60

Service

10

.10 x 76 = 7.60

.10 x 86 = 8.60

.10 x 76 = 7.60

Total

82.4

79.7

84.7

  1. The main shortcoming of the rating system is the arbitrariness of the weights which have to be allocated to different attributes and/or to different elements within each attribute.

  2. For this reason, cost ratio analysis is sometimes commended over the rating system for supplier evaluation.

c. Categorical Plan or model (Judgmental)

  • For each supplier, calculate the extra cost due to his efficiency for the three factors:

    • Poor Quality supplies will mean rejections, replacements, disposal, claims, etc. It could also mean latent defects and poor product performance. All these would ultimately impose costs (most, if not all, measurable) on the buyer.

    • Delayed Deliveries or short shipments could mean stockouts and production disruption plus additional cost for emergency supplies. The cost of delays can be used in supplier evaluation.

    • Poor Service may mean lack of prompt response to the buyer's queries on delivery dates, shipment details. Poor after-sales service may mean more frequent breakdowns and production stoppages, or alternative arrangements involving higher costs.

  • The ratio of these costs to the value of the contract is then used as an index for supplier evaluation.

  • Alternatively, the price quoted, and which forms the basis of the contract, may be adjusted for the additional costs. The Adjusted Price will then provide a measure of the effective price or cost of supply of a given product by different suppliers. This itself will help evaluate the relative performance of different suppliers.

  • Assess the (customer's and) supplier's strategic performance throughout the contract Supplier and Customer Excellence Models

  • Complete the continuous assessment of the supplier during termination and transition to replacement solution Increasing

Supplier and Customer Excellence Model

Source: Office of Government Commerce OGC, Supplier Assessment, Assessing the Working Relationship

Attributes

Supplier

Customer

1. Relationship

   
• Integrity Open and honest; trusting and trustworthy Open and honest; trusting and trustworthy
• Work collaboratively Cross-functional teams; Early stakeholder engagement Manage the project effectively and deploys adequate support resource; Consultation at appropriate levels ...
• Common objectives Understanding  each other’s aims; working towards their  achievement Understanding and buy-in from both parties;
• Shared risk and responsibility Supplier accepts appropriate level of risk;
Provision is made to accept the risk
Do not expect suppliers to take on the total burden of risk
• Communication Stakeholders informed; Performance detail shared (internally and externally); Accessibility All stakeholders informed;
Performance detail shared internally and externally;..
• Attitude and co-Operation ‘Can-do’ attitude; Challenging where
appropriate
Customer offers support when required;
The contract isn’t used as a weapon
• Teamwork Previous performance as team players; Willingness to work in a team  Corporate message is shared with all customer’s team ..
• Motivated Workforce Respected and consulted; motivated;  

2. Capability

   
• Past Performance Successful (defect and problem free) projects completed on time, to budget, and to capability;  
• Resources Personnel, equipment and facilities are up to the job; Personnel, equipment and facilities are up to the job;
Technical competence ...
• Corporate responsibility Sustainability; Encourage diversity;  
• Project and Program Management   Look for (VFM) rather than lowest price;
Appropriate attitude to risk, based on risk assessment
• Capacity Availability; Project workload Program management can cope with all projects;
Awareness of the market sector
• Accreditation ISO accreditation; Industry body approval  
• Health, Safety and Environment  Health and safety record; Environmental performance Demand sustainability

3. Strategy

   
• Strategy Awareness of Customer Strategy; Supplier Buy-in to Customer Strategy Have a strategy, share internally and externally; and develop plan of actions
• Expectations   Supplier's expectations to meet Strategy  requirements ;
Take long term business view into consideration
• Strategy reflects market capacity Long term planning takes into account market forces;
Takes action to prevent problems in the market
Long term planning takes into account market forces; ..
 

4. Quality and Innovation

   
• Project Specification  Meat the Project Specification
 
Setting clear Project Specification
• Pro-activity Long term planning on resource and product
Consulting with customers and pre-empting their needs
Long term planning on resource and product ;
Receptive to innovative suggestions from suppliers
• Continuous Improvement Cross-functional problem solving; Lean; Quality awareness Cross functional problem solving; Business Improvement plan; Benchmarks ; Lean process; Quality awareness

5. Financial Status

   
• Audit reports • Audit reports  
• Bank references • Bank references  
• Previous year’s accounts • Previous year’s accounts  
• VFM   Life-time cost vs. purchase price
• Adherence to Budget   Good project management