Tips for Vendor Performance Evaluation with Technological Solutions

Effective vendor management plays a key role in the procurement process industry-independent, from small businesses to companies operating globally. One of the general mistakes made by companies is to have a negative relationship with their vendors to obtain better prices and better conditions. However, the main goal of the company’s procurement strategy should be to focus on the quality of the service instead of focusing on the price and measure the added value provided by the vendor to the company. Successful companies see their vendors as business partners and manage them taking into consideration that they are in mutual advantage. In this process, it is necessary to have a system that uses technological solutions for selecting, evaluating, and performance monitoring the vendors working together. The controllable and transparent vendor evaluation system is very important for the profitability of companies.

It is very difficult to find the answers to the following questions in companies that rely on individuals and do not use any vendor performance evaluation system.

  • We will start working with a new vendor, could have been purchased from the same vendor in the other projects?
  • How will we compare vendors with similar categories to our new or existing vendors?
  • Are the documents (quality documents, financial statements, etc.) of our vendors up to date?
  • Do our vendors have the competence to provide the materials or services we need?
  • If the process does not go as planned, is our vendor have the competence of managing risk?

It’s possible to reach the answers to these questions in a short time with web-based and interactive vendor management systems. This system should ensure an information repository that can be updated by both vendors and buying specialists, provide access to all vendor information operating in different sectors on a single platform, enable performance evaluation with different criteria by different people, and monitor historical procurement data.

EGVN Global Vendor Network

According to the research of leading research firm Gartner Research (Gartner Group report G00357167), Vendor Performance Management is more than just a scorecard, it is a strategy. This strategy includes periodic evaluations, reviews, and action plans.

So what can we do in the vendor performance evaluation process, what benefits can we provide from technological solutions?

1. Classify Your Vendors

If you especially work with a great number of vendors, instead of preparing evaluation questions for each one, you can start by classifying your vendors according to the category of materials and services you supply, and then assigning a priority level to the vendors. In this way, you can spend more time on your critical vendors. Recording all this classification on a system will also allow you to filter the vendor in the desired material/service category in a short time and save time.

2. Create Performance Indicators

Create monthly, quarterly, and/or yearly performance evaluation indicators to monitor your vendor’s performance regularly. You can use the criteria that the size of the company, quality documents, financial statements, the quality of the goods or services, compatibility with the desired delivery times, the rate of return/scrap, etc. as a performance indicator. If you invite your candidate vendors to enroll on an interactive and secure platform, even a company that is your candidate will have an idea of what features it needs to continue to do business with your company at the start of the process.

3. Record Your Evaluation Results

You have determined the methods appropriate for your company strategy to evaluate vendor performances. Now it is time to record these evaluation results and keep them safe. You should remember that companies that do not create organizational memory are obliged to remain dependent on individuals. You can record all results based on your company’s method with a vendor management system in which performance evaluation forms can be designed, survey questions can be created, questions can be answered by different people from different departments such as quality, hse, procurement. Herewith, you can create a traceable platform, determine your candidates according to scorecard in the bidding process quickly, see which vendor has been evaluated, get evaluation results and get information about corrective and preventive actions. Establishing a system also allows you to monitor your low-performing vendors and help you to improve them.

4. Use Evaluation Systems that Can be Integrated with Your Procurement Management System

It is very important to benefit from not only question sets but also the quotation, purchase order, and delivery data in your procurement management system. You can easily get the data that your vendors’ responding time for your requests for quotation, the compliance with the delivery conditions in the purchase order forms, and the delay time. You can get the reports according to the material or service category, vendor segmentation, and analyze the results.

EGPS Global Procurement System

Companies that can set up an effective vendor performance evaluation system increase their productivity in their procurement processes while minimizing their risks in today’s competitive market conditions. Thus, it contributes significantly to the company’s profitability.