APPLYING SELECTION CRITERIA Qualifying a supplier requires the disciplined application of an objective

process. This typically includes a set of criteria appropriate for that particular supply segment to which
some form of measurement can be added. Evaluation is most commonly performed by a cross-
functional team with members chosen from the various departments or stakeholder groups affected by
the choice of supplier.

(a) SITE VISIT. The site visit is one of the more common tools used to develop an evaluation of a
supplier. While not every member of the team will attend the site visit, it is important that, at
the least, representatives of the user group, the quality group, and supply management attend.
(b) QUALIFYING THE SUPPLIER. Clearly, the site visit is conducted to qualify or continue the
qualification status of a particular supplier. It is a formal process and should be well prepared for
in advance. And since it can be somewhat costly considering travel expenses, the team should
develop a process that will enable it to come away with as much information as possible.

QUANTITATIVE ANALYSIS There’s an old adage: “If it’s worth doing, it’s worth measuring.” (Or
sometimes alternatively expressed: “Nothing that can’t be measured is worth doing.”) This
measurement process is called quantitative analysis to indicate that the analysis is provided in
mathematical terms. With quantitative analysis you will use statistics and analytical matrices to
suppliers.

BALANCED SCORECARD Essentially an analysis technique, it was designed to translate an organization’s

mission statement and overall business strategy into specific, quantifiable goals and to monitor the
organization’s performance in terms of achieving these goals. The balanced scorecard outlines what
organizations need to measure from a financial perspective so that they can work toward achieving a
“balanced” operation.

Weighted Average Scorecard. When evaluating a supplier, you may often use a rating matrix called a
weighted average. A weighted average defines critical areas and attempts to develop an objective,
average score based on the opinions of the various team members.

Weighted Bid Analysis. Another method for comparatively evaluating suppliers’ offers can be
implemented through the use of a weighted bid analysis, or cost-ratio analysis. This method is also
known as transformational bidding because it weighs one supplier’s bid in comparison to others by
transforming the value of their offer to some equivalent percentage based on their demonstrated
performance or added value.

ADMINISTERING THE CONTRACT Once the contract has been approved and implemented, the
procurement professional is in charge of providing continuous supplier evaluation and performance
improvement in relation to the contract. Your objective is not only to measure current performance, but
also to identify areas for improvement and collaboratively develop programs to implement
improvement.

(a) IMPLEMENTING PERFORMANCE STANDARDS AND RATING SYSTEMS. Managing supplier

performance is one of the most valuable functions performed by the Procurement Department.
While this responsibility by its nature must be shared with technical and quality groups, it is
generally expected that the Procurement professional will assume overall responsibility for the
relationship with a supplier.
Tracking Performance. Many organizations monitor supplier performance using a weighted-average
matrix similar to the one used for the initial selection (see Table 3.1, earlier in the chapter). Some of the
specific criteria will change, of course, but it lends the credibility that comes with consistency to
continue to use the same or closely related evaluation data.

Customer Survey. In situations where uniform metrics may be difficult to establish, it is possible to use a
customer evaluation instead. This is typically conducted in the form of a periodic survey, as shown in
Figure 3.2. The results of this survey then provide the data for an element (or perhaps all elements) of
the evaluation. Surveys are more commonly used for service providers.

(b) FOLLOWING UP AND EXPEDITING. In addition to ongoing evaluation of standard contract terms,
a Procurement professional must carry out a number of other internal duties when problems
occur during the performance of the contract. These typically include such activities as
expediting delayed orders, tracking lost shipments, resolving accounting discrepancies, and
returning defective product.
(c) DEVELOPING GOOD PRACTICES. Compliance with good business practices goes a long way to
cementing the relationship between two organizations. To that end, the buyer must be
continually aware of how well the supplier sticks to its stated policies and how conscientiously
its management values ethical principles and strict adherence to legally responsible behavior.

Conformance to Policy. Many organizations develop policy statements regarding ethical and legal
conduct. They do this so that there can be no misunderstanding by employees, customers, and suppliers
of their intentions to manage in accordance with community-accepted principles.

Conformance to Law. In Chapter 2 we reviewed applicable laws and regulations that would likely apply
to supplier relationships. This is by no means an exhaustive list. There are literally thousands of
additional laws governing environmental regulations, working conditions, health and safety, equal
opportunity, and financial practices. If your organization is global, it is likely there are local variations for
all of them. No individual can possibly be knowledgeable about all of them.

Ethical Principles. Would you recommend doing business with an organization that utilizes child labor?
Would you recommend doing business with a supplier that evades taxes by hiding revenues in another
country? Would you approve a supplier that pays substandard wages? Some of these actions may not
actually violate a law, but they may violate the law of your conscience. ..Ethical principles are usually
issued in the form of a document, such as an ethical code of conduct, outlining the organization’s
expectations for employees and suppliers. Sometimes this document is the same for both groups;
sometimes organizations will write them separately.

Environmental Standards Requirements. Since the publication in 1962 of Rachel Carson’s Silent Spring,
governments and business entities worldwide have come under scrutiny for the manner in which they
handle their relationship with the environment.

(d) MANAGING RECORDS AND DATA. Most organizations have policies regarding the management and
retention of records. Some of these policies are based on legal requirements (e.g., the Internal Revenue
Service requires documents relating to taxes be stored for seven years), and others are based on good
business practices, such as keeping journals of engineering activity to limit future liability and to prove
the development history of a particular patent.