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How-Evaluate-Supplier-Fitness For Procurement
How To Evaluate Supplier Suitability For Procurement
It is one thing sourcing and identifying potential suppliers to purchase goods and services from, it is quite another thing identifying the specific suppliers to award contracts and do business with going forward. In this article, I will explore four of the ten most important criteria procurement officers must focus attention on in regards evaluation of supplier's fitness for business association.
Remember, the role of the procurement team is to ensure the supply chain of the organisation is efficient and effective in that it runs well and adds value to the final products delivered internal and external customers. The aim in evaluation process is to ensure suppliers in the supply chain are suitable in delivering value throughout the chain. This applies to procurement of services, works and products. Mistakes made in wrong selection of suppliers can create all sorts of problems ranging from high level of defects in the production process to high level of material and labour wastage all of which will cause high level of customers' complaints. The final result of all these risk is reputational and financial risk which will become the barrier to penetrate a market in the private sector.
Here are some of the areas that procurement staff should evaluate in regards supplier's fitness.
· Competence and capability- is the supplier technically competent to deliver the goods and services that the buyer is sourcing from the market-a big question that will save everyone a lot of time. Competence has to be demonstrated by virtue of supplier's experience in delivering similar products to customers at the required quality standards.
· Resource Capacity- make no mistakes, just because a supplier has the competency to deliver the products does not mean they have the resource capacity to deliver the scale or volume of products required by the buyer. For instance, if the buyer is seeking supplier to supply hamburgers to visitors during the Olympics game, there may be thousands of suppliers in the market with the technical know-how and experience in the field of hamburger production. However, to supply well in excess of 10 million burgers to attendees of the Olympics game, will call for a huge production base from which to prepare the hamburgers and this may not be the league game for many of the small and medium sized suppliers. A giant corporation like Mcdonalds may well be the sole supplier that can meet this requirement thereby eliminating the need for smaller suppliers to be considered for the opportunity.
· Cash resources- who says money is not important in the equation of evaluating suppliers fitness for business as part of the procurement cycle. Well surprise surprise, it is indeed important for medium to large scale projects for which the buying organisation's exposure to supply risk, as well as health and safety risk is gigantic. The buying organisation must evaluate the financial strengths of the potential supplier organisation, in order to ensure it does not run into difficulties with working capital as a result of the scale of operations expected of its when the contract is awarded. For that reason, it is important that the size of the supplying organisation in terms of its minimum turnover for consideration of the tender is factored in the evaluation process.
· Management Controls and Culture- This is so important and often missed out by the naive buyer who is focused on driving down price without recognising the importance of driving down risk simultaneously. The supplying organisations with poor risk management systems can become the cancer in the supply chain network and, increase exposure for the buying organisation with financial losses. It is therefore important that the quality management systems in place, as well as other controls such as financial management systems, staff recruitment and management systems, health and safety systems are all reviewed to be absolutely certain that at a cultural level there will be a good fit between the buying and the supplying organisation.
There are other aspects to watch out for. However, to learn more about this, do visit our website at http://www.businessservicessupport.com where you will find more resources and details of our training courses.
Business Management Trainer