Supplier Appraisal and Vendor Rating
Supplier appraisal is an approach used to evaluate the ability of a supplier to enforce control and comply with the terms and conditions stipulated on a contract that is signed between a vendor and a firm. The ability of a firm to adhere to the terms and conditions of a contract and to enforce the variables stipulated in the contract ensures adherence to good procurement practices. These variables include time, quantity, quality, lead time, packaging, documentation practices, technical support, after-sales services, and other supporting activities.
On the other hand, vendor rating is a performance rating system against an established benchmark. The benchmark used for rating is characterized by variables such as the quality of a product, quantity, delivery, time and methods, documentation methods, and is based on the just-in-time concept widely applied in the United States. Vendor rating is used to evaluate the effectiveness and efficiency of a vendor and provides precise information for identifying good suppliers. This approach provides information on the correctional measures a company can undertake to meet the established vendor rating criteria.
Details such as the condition of the goods on arrival, deviations or consistency with the agreed-upon price, quantity of products delivered, reliability and integrity of documentation, the delivery time, and the ability to sustain a product’s packaging are critical elements in the vendor rating system.
The performance of a supplier can be rated on the technical skills of its employees, management competency, management approaches to enforcing controls, ability to consistently supply the required products, its financial stability, and its strategic abilities in terms of its capital needs.
Supplier Appraisal
These factors include product quality. Quality is an integration of the aspects of the time between which a system fails and the time taken to renew a system’s functionality. The difference between the uptime and the downtime provides effective information about a system’s functionality, efficiency, and reliability. The effectiveness with which a firm responds to customer needs and concerns, effective product deliveries, incorporated as service quality is another factor to consider.
Approaches to a firms’ financial administration, commercial considerations are other key factors to consider. Some commercial factors such as ethical considerations, organizational culture, ethical issues, and values and norms determine a firm’s ability to competitively enforce all the aspects of a contract. Another factor is the ability of a firm to price its services competitively. Business organizations operate in environments that are highly competitive. One of the factors that may lead a business to loose business is poor product pricing. Customers get attracted to those firms with product offerings that they perceive are appropriately priced.
Other factors include the attention performance appraisal staff get from the supplier firms, individual attitudes, maintenance levels of manufacturing equipments, quality control enforcement mechanisms, effective housekeeping, and the level of technical expertise of the supplying firm.
Examples where companies have progressed by radically factoring these concepts of supplier chain appraisal and vendor rating system is Honda and Ford. Deeply integrated into their systems have seen them dominate in the business environment. Their products and services have consistently been of good quality over the years.