MOST Analysis

Mission Statement

Vendor evaluation is one aspect of the sourcing strategy itself. Vendor evaluation is done to ensure that a good portfolio of suppliers is available for use in the transformation program. Vendor evaluation can also be applied to current suppliers in order to monitor and measure their performance. It is essential for decreasing costs, minimizing risk as well as for the continuous improvement of the process. Vendor audits must be undertaken from time to time in an organization as there is always a need for quality control in the technology market. Vendors are required to deliver the same quality of products and services as agreed in the contract. Continuous vendor evaluations ensure that they comply with these quality standards. Particularly in the case of a new project or a new procurement, vendor evaluation is absolutely essential. It helps in determining whether a prospective vendor will be able to meet the organizational standards and the specific requirements of the digital transformation project undertaken. The goal is to choose a low-risk vendor that offers the best-in-class products or services. There are many important factors to consider when choosing a vendor for a particular project. Apart from the quality of product or service, there may also be legal risks involved such as regulatory compliance requirements or cybersecurity risks. Proper vendor assessment help in mitigating these and similar risks reducing the liabilities on the organization. Vendor evaluation can be done on many different criteria. If the vendor evaluation is being done for a new product, competitive selection can be done by comparing the features and services offered by different vendors and choosing the one that best suits the project requirements. Vendor evaluation can also be done by separately scoring individual vendors on different factors, such as price, features, reliability in delivery, and so on, and then comparing the scores to choose the highest scoring vendor.

---

Objectives

01. Collect Vendor Data: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
02. Price & Cost Analysis: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
03. Managing Vendor Risk: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
04. Vendor Communication: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
05. Vendor Relationship: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
06. Vendor Culture: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
07. Vendor Stability: departmental SWOT analysis; strategy research & development. 1 Month
08. Vendor Viability: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
09. Vendor Quality: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
10. Vendor Performance: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
11. Classify Multiple Vendors: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
12. Vendor Audit: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month

---

Strategies

01. Collect Vendor Data: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
02. Price & Cost Analysis: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
03. Managing Vendor Risk: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
04. Vendor Communication: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
05. Vendor Relationship: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
06. Vendor Culture: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
07. Vendor Stability: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
08. Vendor Viability: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
09. Vendor Quality: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
10. Vendor Performance: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
11. Classify Multiple Vendors: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
12. Vendor Audit: Each individual department head to undertake departmental SWOT analysis; strategy research & development.

---

Tasks

01. Create a task on your calendar, to be completed within the next month, to analyze Collect Vendor Data.
02. Create a task on your calendar, to be completed within the next month, to analyze Price & Cost Analysis.
03. Create a task on your calendar, to be completed within the next month, to analyze Managing Vendor Risk.
04. Create a task on your calendar, to be completed within the next month, to analyze Vendor Communication.
05. Create a task on your calendar, to be completed within the next month, to analyze Vendor Relationship.
06. Create a task on your calendar, to be completed within the next month, to analyze Vendor Culture.
07. Create a task on your calendar, to be completed within the next month, to analyze Vendor Stability.
08. Create a task on your calendar, to be completed within the next month, to analyze Vendor Viability.
09. Create a task on your calendar, to be completed within the next month, to analyze Vendor Quality.
10. Create a task on your calendar, to be completed within the next month, to analyze Vendor Performance.
11. Create a task on your calendar, to be completed within the next month, to analyze Classify Multiple Vendors.
12. Create a task on your calendar, to be completed within the next month, to analyze Vendor Audit.

---

Introduction

Vendor Evaluation: The What, How, and Why

Organizations perform vendor assessments to screen potential suppliers and assess their interactions with current ones. One of the most crucial choices a business must make to be competitive is how to evaluate its vendors, especially in these times of rapid market change.

Putting a Vendor Evaluation System in Place

Vendor performance evaluation should not only be a process used for assessing new vendors; it should also be a regular component of your company’s procurement activity. Using categories and rankings within those categories, a good supplier assessment system will frequently review suppliers to identify strong and weak supply areas. Evaluations assist in identifying which suppliers should be given priority as well as in identifying potential danger areas, even for businesses with a restricted number of suppliers they can use. The system’s ultimate objective is to monitor vendor performance consistency in a way that is integrated into the purchasing process.

Clear KPIs and measurements aimed at company priorities, as well as red flag measures to highlight when a supplier doesn’t meet criteria, should be included in vendor evaluation. Every time a supplier is used, the procurer should rate them, and there should be a deadline for when they should submit their ratings. The individual or group classifying vendors should also routinely check the input. When procurers evaluate supplier performance, adopting a numerical assessment system may be simpler because companies may be quickly ranked using the final results.

These rankings and metrics ought to be external as well. It’s critical to come to an understanding on them with your vendors so that they are aware of them and can offer input. Clarifying expectations for them and motivating improvements can both be accomplished by incorporating a system of recognition and reward for progress. Using agreed-upon KPIs and measurements inconsistently, failing to provide suppliers with regular feedback on their performance, neglecting supplier input when discussing and choosing measures, and conflating metrics and KPIs are all common faults in vendor assessment systems.

What is Supplier Evaluation?

Supplier evaluation in procurement refers to a formal review of suppliers to analyze their performance in relation to various criteria and determine whether they satisfy organizational needs. The goal is to build a portfolio of useable suppliers that is best-in-class and low-risk.

A pre-qualification step in the purchase process, supplier evaluation is a constant process for procurement departments.

According to Hald and Ellegaard (2011), supplier evaluation is “the process of quantifying the efficiency and effectiveness of supplier action.”

So, to put it simply, evaluating a supplier is determining whether or not they are a suitable fit for your company. In addition, it evaluates the performance of your present supplier base to identify areas for cost-cutting, risk-reduction, and ongoing improvement. A transparent and equitable alignment of objectives, data, and analysis with suppliers is the first step in an efficient supplier assessment process.

---

The Importance of Vendor Evaluation

Utilizing few resources as effectively as possible is the aim of every procurement organization. To secure the best contracts in terms of quality, pricing, flexibility, and reliability, it is therefore vital to evaluate suppliers.

Although the supplier evaluation process can be difficult, the rewards of locating low-risk suppliers of high-quality products and services as well as mutually beneficial, long-term business relationships outweigh the challenges.

Some of the other benefits of supplier evaluation include:

• Risk mitigation: You may reduce the legal, contractual, and security risks connected to using technology outside of your business by properly vetting vendors.

• Enhanced supplier performance: The effectiveness of the procurement process as a whole is directly correlated with improved supplier performance. The supplier evaluation and appraisal criteria account for 57.1% of the performance of the procurement process (Murigi 2014). This is so that suppliers are encouraged to continually enhance their operations by increasing productivity and being more creative. However, when businesses base their decisions on supplier performance goals, they observe amazing results.

• Cost reduction: Any firm should consider supplier evaluation because it has a direct impact on the price and quality of purchased goods. Additionally, a small increase in price and quality brought on by supplier choice has important advantages for businesses.

• Leveraged supply base: Evaluation of supplier performance aids in standardization, which produces better outcomes for enterprises. It also enables businesses to plan their objectives and courses of action in accordance with the capacities and performance levels of their suppliers.

A quality criterion is a useful tool for evaluating suppliers since it encourages them to continuously enhance their processes by increasing productivity and becoming more creative. The performance of a purchasing organization’s suppliers is crucial to its success. It’s crucial that both the supplier and the customer agree on what constitutes satisfactory quality.

• Strengthened supplier relationships: Effective supplier management promotes loyalty, cooperation, and communication, which provides the groundwork for long-lasting, mutually beneficial working relationships.

• Improved business outcomes: By working with reputable suppliers, you’ll be able to offer products and services that are of higher quality and more affordably priced. As a result, you will be able to better service your clients and increase both sales and client loyalty.

---

Supplier Evaluation Process

The first step in the supplier evaluation process is to assess your business’ demands and create a list of specifications so that the appropriate vendors may be contacted or discussed. The suppliers are then evaluated using a selection criterion, which includes selecting how to assign a score to each source based on these factors.

A market analysis is done to determine a predetermined number of suppliers who will take part in the request for a quotation, or RFQ, procedure before possible suppliers are evaluated. Making an initial list of bids after gathering a small number of suppliers is an alternative to the second phase. The suppliers on this list all meet the criteria. The suppliers on the list are then given a request for information (RFI) to learn more about them. The purpose of the RFI is to see whether the company is interested and to gather enough data to make a preliminary assessment.

All of the company’s stakeholders are involved in the evaluation of the suppliers when the bids or RFIs are received. Companies are ultimately chosen as suppliers depending on the outcomes and negotiations.

The majority of procurement specialists will concur that there is no one optimal method for evaluating providers. Companies employ a variety of strategies to determine what is effective and what is not. Regardless of strategy, the evaluation process’s ultimate objective is to minimize risks and increase total value for the procurement organization.

It’s vital to note that supplier selection does not eliminate the requirement for supplier evaluation. In reality, it is imperative to monitor the supplier’s progress after an association is created. Companies can identify which suppliers are performing the best and where there is room for development by ranking them according to various indicators.

Supplier Evaluation Criteria

A multi-criteria problem, supplier assessment incorporates both qualitative and quantitative elements. Because of this, creating general selection criteria and using them in any circumstance is insufficient.

Having said that, the criteria for evaluating suppliers should be in line with the goals, mission, and vision of your organization. It should also take into account aspects like corporate social responsibility, communication, and cultural commitments in addition to aspects like quality, cost, and financial integrity.

Reviewing the standards that are most important to your business is another step in the evaluation of vendors and suppliers. Data security, for instance, is of highest importance to a healthcare organization, and they must also take into account many compliance rules; as a result, these criteria take precedence over other considerations.

However, businesses frequently face contradictory tangible and intangible elements where it is challenging to decide.

For this reason, the supplier selection process must engage all pertinent company stakeholders, including procurement, engineering, logistics, production, etc. The stakeholders must agree on the selection criteria. By doing this, it is ensured that each is given the appropriate amount of weight based on their relative relevance, corporate priorities, and strategy.

---

12 Criteria to Evaluate Suppliers

The performance of an organization’s procurement department is correlated with its capacity to develop proper supplier evaluation criteria.

Murigi (2014) estimated that the supplier evaluation and appraisal criteria account for 57.1% of the performance of the procurement process.

The most frequently utilized criteria are typically those that relate to the delivery of materials, quality, pricing, financial situation, communication, and technology. However, depending on the method, there may be numerous additional factors that are more crucial than those described above. As a result, compiling a single, exclusive list is difficult.

Here are a few of the different factors that a company could consider when assessing potential suppliers:

1. Quality: Quality is a difficult notion to describe. The description supplied by IBM is the one that best describes the supplier evaluation process: “The extent to which customer requirements are met determines quality.

When both the provider and the client agree on standards and these requirements are accomplished, we talk about a quality product or service.” Thorough departmental, supplier, and customer consultation is necessary for quality management. Following the determination of the necessary quality levels, the entire manufacturing process must be set up to ensure that the quality level is attained and maintained in a manageable manner.

To do this, quality management relies on four interrelated processes: standard-setting, assessment, control, and assurance. The extent to which the procedures are followed to satisfy the requirements listed in national and international standards is determined by an external as