Criteria for qualifying and shortlisting

suppliers - A Case Study

MUNEESWARAN S

ER/SMM/NOV22/0006

COURSE NAME: CERTIFICATE PROGRAM IN SUPPLY & MATERIAL

MANAGEMENT.

WELINGKAR INSTITUTE MANAGEMENT DEVELOPMENT

AND RESEARCH
APRIL 2023

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 Table of Content
Sl.No Page No

1 Synopsis 3

2 Importance of Supplier Evaluation 3

3 Supplier Evaluation Process 4

4 Supplier Evaluation Criteria 4

5 Key Criterias to Evaluate Suppliers 5

6 Supplier Evaluation Checklist 5

Criteria for qualifying and shortlisting suppliers - FMCG Trading

7 6
company

9 Conclusion 6

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 Synopsis

Organizations conduct supplier evaluations both to qualify the potential suppliers and to
assess relationships with the existing ones. Supplier evaluation represents one of the most important
decisions in a company to remain competitive, especially in times like now when markets are
changing very fast.
In procurement, supplier evaluation means a formal assessment of suppliers to measure their
performance against various criteria and determine if they meet the organizational needs. The
objective is to create a best-in-class and low-risk portfolio of available suppliers for use.
Supplier evaluation is a continuous process for procurement departments and is also a pre-
qualification step in the process of purchasing.
According to Hald and Ellegaard (2011), supplier evaluation is "the process of quantifying the
efficiency and effectiveness of supplier action."
Thus, in simple terms, supplier evaluation means assessing whether a supplier is a good fit for your
business or not. At the same time, also takes into account your current supplier base to measure their
performance and uncover opportunities for cost reduction, risk mitigation and continuous
improvement. Thus, effective supplier assessment is a holistic process that starts with aligning
objectives, data, and analysis with suppliers in a transparent and fair manner.

Importance of Supplier Evaluation:

The goal of every procurement organization is to utilize limited resources most efficiently.
This makes evaluating suppliers necessary to ensure the best contracts in terms of quality, costs,
flexibility, and reliability.
The supplier assessment process might be challenging, but the benefits of finding low-risk sources of
high-quality goods and services plus mutually beneficial, long-term business relationships outweigh
the efforts needed.

Supplier Evaluation Process:

The supplier evaluation process starts with evaluating your company's needs and developing
the list of requirements to contact or discuss with the right suppliers. After this, a selection criterion is
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designed to evaluate the suppliers, including deciding a way to score the suppliers on these criteria.
When evaluating potential suppliers, a market survey is carried out to identify a set number of
suppliers which will participate in the request for a quotation or RFQ process. A variation of the
second step is to gather a limited group of suppliers and make an initial bidders' list. This list
comprises suppliers who satisfy the requirements. Then a request for information or RFI is sent to
suppliers in the list to get more information about them. The RFI aims to know if the company is
interested and gather enough information to make a rough evaluation.
Once the bids or RFIs are received, the suppliers are evaluated, involving all of the company's
stakeholders. In the end, companies are awarded as suppliers based on the results and negotiations.

Most procurement professionals will agree that there is no one best way to assess suppliers. That's
why companies use different approaches to see what works and whatnot. Irrespective of the
approach, the final goal of the assessment process is to reduce risks and maximize overall value to
the procurement organization.
It's important to mention here that the need for supplier evaluation does not end with supplier
selection. In fact, after an association is established, it becomes necessary to track the supplier's
performance over time. Ranking suppliers on various metrics helps companies figure out which of
them are performing the best and where there is room for improvement.
Supplier Evaluation Criteria:
Supplier assessment is a multi-criterion problem that includes both qualitative and
quantitative factors. That is why developing standard selection criteria and applying them
indiscriminately to any situation does not suffice.
That said, supplier evaluation criteria should align with your company's mission, vision, and
business goals. Additionally, it should also include factors like quality, cost and financial integrity,
corporate social responsibility, communication, and cultural commitments.

Key Criteria to Evaluate Suppliers:

According to Murigi (2014), 57.1% of the performance of the procurement process is directly
determined by the supplier evaluation and appraisal criteria.
Usually, criteria like materials delivery, quality, cost, financial position, communication, and
technology are the commonly used ones. However, there can be many other criteria, more important
than those mentioned above, depending on the process.
 Quality
 Price/Cost

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  Performance Delivery
 Service
 Financial Strength
 Lead-Time
 Technical Ability
 Flexibility
 Development
 Management Approach
 Geographic Location
 Environmental Regulation Compliance

Supplier Evaluation Checklist:

Supplier evaluation is a continuous process and ensures you keep your customers and your
priorities on top. Following are the steps you can tick as you walk through the process to make sure
you follow the best practices while assessing your suppliers
 Conduct regular evaluations of your supplier's performance.
 Establish supplier evaluation criteria as well as standards, processes, and procedures
around it.
 Create a supplier assessment form to standardize your evaluation and make your
decisions better, faster, and more strategic.
 Select and classify your suppliers based on your supplier assessment goals.
 Make use of your data and bring facts to your supplier discussions. Also, keep the
communication going at all times, especially with your strategic suppliers.
 Use technology to make the best use of the information you have.
 Organize regular conversations with your suppliers to plan and improve on sub-optimal
areas.
 Re-evaluate supplier performance based on your established criteria.
 Repeat the process.

Criteria for qualifying and shortlisting suppliers - FMCG Company

Suppliers play a critical role in helping FMCG Trading companies succeed. In order to find the right
ones, businesses need to consider a number of critical factors, including:

 Price
 value for money
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  quality
 reliability
 responsiveness
 Flexibility
 GST Filling history
 Finacial Stability
 FSSAI certification

Conclusion:
In conclusion, it should be stated that the main criteria for supplier selection apart from the cost are
quality, service, expertise, risk factors, and delivery. The optimal choice of suppliers occurs only at
the intersection of these variables. Therefore, based on the industry needs the criteria should framed
and it requires timely evaluation as well.

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