Selecting a vendor can be a tricky business. How to determine which vendor should become your long-term partner? This is the number one question on everyone’s mind during the vendor assessment process.
This article aims at bringing to your notice the various vendor selection criteria along with the checklist you need to keep in mind.
What Exactly is Vendor Assessment?
In simple terms, this is an approval and evaluation process. Businesses do this when they have to see whether any prospective vendor meets the standards of their organization. The aim of this process is threefold:
- Low-Risk
- Supplier Portfolio
- Best-in-class Vendor
There is one distinction that you must understand before moving to the vendor selection checklist. A supplier and vendor both give goods and services. But a supplier’s sales relationship only applies to business-to-consumer or B2C. In contrast, a vendor’s sales relationship applies to both business-to-business (B2B) along business-to-consumer.
Different Methods of a Vendor Selection
There is no one specific way in which a vendor evaluation happens. There are various aspects that one might include in the vendor evaluation template. Hence there are different methods that you can adopt for the same. The technical and commercial evaluations are just a few such methods.
The following are a few common methods that you can adopt while conducting a vendor evaluation:
- Technical Evaluation:
The evaluation process in this method is, as the name suggests, more on the technical side. You would look into the:
- scientific capabilities
- standards of compliance
- innovation
- technical equipment
- Commercial Evaluation:
When looking into the commercial side of a potential supplier or vendor, you must look into:
- Their market dominance
- Reputation
- Advertising and market presence
- The awards that they have won
- Their Delivery timeline
- Any existing clients
- Before-the-fact:
As an evaluator, you would gather as much data as possible from any public source. This would include any supplier or vendor endorsement and reviews from earlier projects. You would find the necessary answers to REPs and RFIs, along with any substantiating documents.
- After-the-fact:
For this evaluation, you must review their engagement or their shipment and assess the process and performance. Go in and ask stakeholders about the operations that take place. All the successes and the failures as well. Depending on the kind of responses you get, you can then make decisions for your plans.
- Records:
Here you would have to gather data from other public sources. This would include Industry news items, financial records, or even award notices.
The aim of these vendor and supplier assessment criteria is so that you can base your decision on proper data and evidence. In this competitive market, you should not be adamant about cost-saving. In that case, you might end up spending more due to a bad quality product.
Vendor and Supplier Assessment Framework
This vendor selection process will help you rank and vet potential suppliers or vendors whom you might approach. The framework follows a standard vendor selection criteria checklist. Through this, you can assess whether the vendor is suitable for you or not and the different risks that your company might be open to.
With the help of an assessment framework and checklist, you can determine the best vendor for your company. You might find these small and systematic steps in the vendor analysis helpful process.
Following are the vendor selection criteria to keep in mind during the evaluation process:
- Budget:
Before looking into any other step, this is a base question that you need to know the answer to, whether the vendor falls within your budget. If the vendor does not quote a reasonable price to deliver your service or product, there is no point in carrying on with the rest of the evaluation.
- Financial Stability:
It is important to know the financial stability of any entity that you might work with. Ask the vendor if it’s possible for you to see the profit and loss statements along with the current asset lists. Based on this, you will be able to make a conscious decision on the vendor’s financial stability.
- Ability:
Look into the previous works done by the entity to verify the competency of the vendor. Request them to provide you with:
- Quality records
- Essential personnel background and their abilities
- Their recruitment methods
- Capacity:
Have a look into the entities forecasted and current order to measure whether they can take you on as a client. This will showcase whether they have the capacity for your business or not. You can ask them for their operational statistics if required.
- Internal Processes:
It is important to see how they control their internal processes. Look into the following aspects:
- How they conduct their inventory
- Their marketing process
- Their quality control operations
- Health and safety
- Consistency in their Performance:
You must know that whomever your future partner is should deliver good quality service and products on time. Consistency is key over here.
- Culture:
Finally, see whether your potential future partner shares the same ethics and values as your company. It might not seem important, but it plays a significant role in making sure the work happens smoothly. This is one of the main points that will ensure you find a business partner for the long haul.
In a nutshell, you must remember that building a meaningful and lasting relationship with your vendor is crucial. Companies have now started to realise the importance of selecting the right vendor. In today’s world, you might find yourself with a vendor halfway around the globe. These vendor inspection checklists have never been more important than now. Even if it’s only one single vendor, their performance directly implicated your service or product. Hence it is important to choose the right one. After completing the vendor analysis process, you can then commit yourself and your company to one without fear. This might just be the difference that makes your company’s future even more successful.