Supplier rating

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A Supplier rating (or vendor rating as it sometimes referred) is a business term used to describe the process of measuring an organizations supplier capabilities and performance.

Supplier rating often forms part of an organizations supplier relationship management program. Such systems can vary in the criteria that is assessed this broadley falls into quantative and qualative types [1] can be used as when undertaking vendor rating, the process varies from one organization to another – common criteria often includes:

  1. Quality – for example number of not right first time deliveries
  2. Delivery Schedule Adherence
  3. Cost/Price
  4. Capability
  5. Service

Results of each variable are then weighted into a final score – usually a percentage, allowing suppliers to be ranked.

Supplier rating is an ongoing activity[2], suppliers are often assessed continuously or periodically (i.e. assessing the last years trading). Various criteria can be analyzed within supplier rating systems – A common approach is to utilise Cost Quality and Delivery measures and apply weighting against criteria in accordance with company requirements[3]

Organizations then often band suppliers according to results which may commonly be used to highlight poor performing suppliers so that they can be removed from use. Supplier rating results may also trigger improvement programs on suppliers that score low. Trend analysis is often applied to supplier rating which allows organizations to monitor changes in supplier performance over time.[4]. Both suppliers and buyers should utilise supplier ratings system to drive performance and improve the business relationship.[5].

Contents

[edit] Problems with Vendor rating

Effective supplier rating requires a consistent and objective approach - where rating criteria is open to interpretation inaccuracy can be introduced. This is especially true where subjective criticism from buyers is introduced into the rating process. It must be remembered that past history is not always a guide to future performance [6] and that suppliers should be consulted as part of the assesment.

[edit] References

  1. ^ What Every Engineer Should Know About Quality Control By Thomas Pyzdek
  2. ^ Purchasing Performance: Measuring, Marketing, and Selling the Purchasing Function By Derek Roylance
  3. ^ Example supplier rating systems supplychainmechanic.com
  4. ^ What Every Engineer Should Know About Quality Control By Thomas Pyzdek
  5. ^ http://www.adm.monash.edu.au/procserv/purchasing/cips-appraising-suppliers.pdf CIPS appraising suppliers
  6. ^ The Gower Handbook of Management By Dennis Lock, Gower Publishing Company

[edit] Further reading

Corporate homepages publicising example supplier rating programmes.

Raytheon Supplier rating homepage
Borealisgroup Supplier rating program

[edit] External links

Supplier Comparison Chart - Easy to use tool for suplier rating and evaluation

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