This is the 2nd article of 3 dealing with “SUPPLIER PERFORMANCE MEASUREMENT”. The 3rd article will address “HOW TO EVALUATE THE SUPPLIER & USE THE INFORMATION”.
This is a significant point of activity. Please note that it is Procurement’s responsibility to initiate, coordinate and present to the organization the findings of this activity. It starts with interviewing/interacting with the “internal customers” regarding their needs (materials, projects, and services).
It starts with an orientation of the internal customers as to the intent, approach, effort to be put forth in selecting a supplier from the perspective of the entire enterprise. We want everyone’s viewpoint on these points of measurement. This is desired to ensure everyone is on the same thinking page. In doing this we submit the following table for their consideration:
DEGREE OF NEED: (1=Must Have; 2 = Nice to Have; 3 = NA) SELECTION CRITERIA VALUE APPLICABLE (YES / NO) EXPLANATION OF NA COMMENTS
Quality systems 15
Prod Dev Systems 10
ISO 5
Proc & Matls Control 30
Environmental Program 5
Housekeeping 10
Ethics 5
% of our Business 10
Finances 10
TOTALS 100
Please note that the criteria noted in the table are typical for many industries. However, it is recognizable that there may be more appropriate CRITERIA for your enterprise. The same holds true for the values applied to the respective criteria – value is associated with importance. You need to apply the logic and importance for your respective businesses. This is also relative to which commodities or services you are dealing with – regarding applicability of this selection process.
The intent of the values is to employ a quantitative tool rather a subjective evaluation, permitting a more appropriate way of determining the score achieved (the rating consideration requires a set of guidelines to be used by the evaluator of the supplier – a separate task to be addressed in another article “DOING SUPPLIER SURVEYS”).
Once this is reviewed by the Procurement Team, discussions with each internal customer are done to arrive at an agreement regarding what the final criteria will be and its' respective values.
The next step in the Supplier Selection Process is employing the criteria in the development of a survey. This survey will have several questions related to each criterion, totaling up to the respective value. Once completed, the acceptance level needs to be met – that can be a minimum of 65% with corrective actions defined by the prospective supplier and buyer within a defined time.
REMEMBER TO LOOK FOR THE THIRD & FINAL ARTICLE (“HOW TO EVALUATE THE SUPPLIER PERFORMANCE & USE THE INFORMATION”) IN THIS SERIES.