Importance of Supplier Evaluation

Having a good relationship with your supplier is an assurance of business growth. One of the major factors that lead to poor /lack of growth in a business is poor management of suppliers.

Companies that practice supplier evaluation often find themselves able to effectively evaluate suppliers’ performance and hence discover any hidden costs, reduce risks, get a competitive advantage by reducing order cycle times and inventory and hence business growth become possible.

To consistently satisfy customers in any business requires a continuous search for the best suppliers. Whether you have multiple or one supplier, it is of the essence to choose the one who brings more benefit to your business.

What is Supplier Evaluation

This is a strategy that is used to evaluate and monitor the performance of suppliers regularly to help a business improve its performance.

How do you evaluate a supplier? An effective supplier evaluation process should be which assists you to motivate suppliers to improve on their performance. So, what should you look at when carrying out the evaluation process?

Supplier’s Performance

A supplier should be able to handle all your business needs and typical functions. Their abilities and limitations should be your number one priority. If you want to get it right have a strategic supplier performance evaluation to help you evaluate and cover all your business requirements.

Supplier Reliability

Check their commitment to your business needs and also towards the production of high-quality services. They should also signify that they are committed to you, as their customer, on a long-term basis.


The quality of your products will be a ticket towards either gaining or losing even the most loyal customers. One of the central components of an effective supplier evaluation is the ability to quantify the quality of products.

A supplier should be able to provide the highest quality products all day long. Ensure that they are consistent in their production of products and still maintain the quality.

Production Capacity

Is it possible for the supplier to handle all your requirements and deliver in time? How quickly can they deliver? Can they handle fluctuations in supply and what are their resources to service all customers?

Environmental Impact

Sustainability is an essential part of any business both financially and for ethical purposes. Are their production methods sustainable? Ensure that their processes are environmentally friendly. Any evaluation process should cover a supplier’s waste management strategies, waste reduction practices and material procurement procedures.

Benefits of Supplier Evaluation Process

Supplier Evaluation Process

Improves the Performance of Suppliers

The main importance of supplier evaluation and selection process is to enhance improvement of supplier performance. The results of an effective evaluations process should be which yield results.

Follow up activities such as supplier development and training are also crucial. In addition, finding other measurable actions that can address any suppliers’ shortcomings and coming up with effective measures to yield positive results should also be looked at to motivate suppliers up their game.

Boost Supplier Performance

The most effective way to keep suppliers on their toes is by evaluating them regularly. It also leads to a better and strong working relationship. With a proper supplier evaluation procedure at hand, companies can analyze other important aspects such as quality, delivery and cost management that facilitate poor performance. Even better is that a business can come up with measures and re-strategize on the same.

Eliminate Unnecessary Costs

A better way to expose, discover and layout any extra layer of visibility not only on quality but also on production costs is through supplier evaluation and performance monitoring. 

Any hidden costs can cause supply chains inefficiencies and lead to business collapse. The good thing is that all these inefficiencies can be controlled and addressed on time. One of the easiest ways is by improving communication between suppliers and the company.

When there is effective communication, companies can easily express their wants to suppliers and vice versa, hence create a mutual understanding and eliminate wasteful costs. This is also a perfect way to help save on other business expenses and still ensure customer satisfaction.

Improve Performance Visibility

How can you prove that your business is performing? When a company uses poor supplier evaluation methods, it is impossible to know the performance of suppliers. The simple process of measuring the performance of the suppliers can help improve the overall performance of the company. This improvement can go the extra mile whereby companies award additional business to suppliers meeting performance expectations and goals.

Get Rid of Business Risks

When you communicate with suppliers eliminate defects in the supply chain. The supplier can understand exactly what your customers need so that he/she can improve their delivery and performance and reduce potential risks.

Other risks such as financial or operational can be mitigated by conducting regular supplier evaluation procedure. If you want to improve efficiency in your company a vendor evaluation process will be perfect.

Builds Trust and Transparency

Trust and transparency with your suppliers are very vital to the success of your business. By clearly defining what you actually want from your suppliers will create an atmosphere of trust and transparency.

These values are important to foster because if your suppliers know exactly what to expect when doing business with your company, they can deliver much higher quality. Through effective communication and clear direction to the business partners, they are also more likely to be responsive when it comes to future product and process innovation which fosters efficiency and progress.

The Take-Away

The idea of just evaluating your suppliers is good but cannot be effective if the results aren’t used. Companies need to use the results as a starting point for supplier performance improvement.

Liaise with a reliable product sourcing company that offers supplier evaluations services, create greater value for your products and enjoy working in a transparent and efficient environment.

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