The Importance of Supplier Appraisal

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These days the sheer volume of tasks that SME businesses undertake just to ensure their survival is phenomenal. Taking shortcuts and cut downs on these required activities is very tempting. Some businesses, when shortcutting business processes often neglect the very important evaluation of their suppliers, reducing supplier business reviews and appraisals, particularly when their performance appears to be, on face value, satisfactory.

Supplier Risks

Businesses are normally dependent on their supplier’s ability to ensure a continuous and timely material flow. Maintaining this flow of parts is one of the main reasons why suppliers are evaluated, to help de-risk the business.

The continuous flow of supplies is affected by many factors such as environment, raw materials, cash position, etc. So when businesses become dependent, supplier’s risks are concerns they have to face. No supplier can claim zero risk, it just doesn’t exist, but proper and continuous evaluation of the supplier’s performance will keep that risk in check. Evaluation through close communication can help identify potential risks, which can be managed or addressed. Neglecting this evaluation can result in the organization only realizing the extent of the risks when the problem is already present and your corrective actions will not change the fact that your business has already suffered.

Minimizing Defects

The process of evaluation also creates a venue to communicate your needs thus improving your suppliers knowledge and making their production better suited for your business. The appraisal activity leads to supplies with lesser imperfections since the exchange of ideas helps the suppliers understand your requirements clearer and gives you time to discuss and review any production issues that may arise.

Improved Coordination

This process does not only manage the risk, but can also improve your business efficiency. Evaluation brings about better coordination between the two of you. Proper evaluation of the production process can result to clearly planned schedules or time line of production particularly when your demand profile is variable. Giving them a good picture of your requirements will help them do the necessary planning and scheduling to meet your demands. The supplier in turn gets the opportunity to learn your operations therefore giving him the chance to eliminate all your issues and concerns making him a more efficient supplier.

This coordination between customer and supplier gives you a better chance of achieving your targets.

During the appraisal process, buyers and suppliers are given a chance to work as a team, which will definitely produce better result than working separately. This coordination will also lead to alignment and integration of processes between the customer and the supplier with a more consolidated working relationship the result.

Evaluation Process as Suppliers’ Incentive

The evaluation process can also act as a suitable venue for suppliers to present innovation. The evaluation itself may act as an incentive for suppliers to be more creative. Unlike the olden days where the suppliers are dominated by the custumer (“I want what you provide but for 25% less”), evaluations are no longer used for the purpose of beating up on the suppliers but rather a way of solving problems and launching development or improvement activities.

Better Paper Work

This process also provides the suppliers the time resolve problems on administrative concerns. Invoices and delivery receipt are just some of the concerns administration can correct, thus making the evaluation process more efficient.

Evaluation Process: In Keeping your Competitive Edge

The evaluation process may serves as a tool for three important purposes needed for an improved relationship: one it manages the risk; two it minimizes defective supplies by solving problems which may arise from the supply chain, and three it breeds an environment that improves efficiency and delivers savings.

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