Supplier evaluation involves actions taken by organizations to evaluate and approve potential suppliers through quantitative methods. The goal of supplier evaluation is to establish a selection of superior suppliers accessible to the organization. Additionally, supplier evaluation is an activity that is applied to active suppliers to evaluate and scrutinize their performance for the purpose of decreasing costs, diminishing risk and facilitating ongoing improvement.
Supplier evaluation is an ongoing process for buyers and begins with the purchasing pre-qualification process. Often, organizations use a five part process to decide which supplier to approve. Many times, the process includes a questionnaire, interview or onsite meeting. Supplier appraisals, such as capacity, financials, organizational structure, processes and performance, as well as quality assurance are provided. This data is then evaluated and either approved or unapproved. If approved, the supplier is generally evaluated on an ongoing basis. The reevaluation is called supplier performance management.
Utilizing supplier evaluation brings forth suppliers who offer exceptional products and services. Additionally, supplier evaluation can help recognize and remove unknown cost drivers in the supply chain. It also encourages suppliers to provide its best service.