SUPPLIER APPRAISAL

10 Cs’ of supplier appraisal

As a procurement manager or a person holding just about any significant decision making position in procurement, you have to be on top of your game when it comes to handling all matters relating to the procurement process. The issue of supplier appraisal is very important in procurement procedure and if properly done it sees that you avoid wasting time, cost and effort not to mention embarrassment that comes with awarding a contract to a supplier or tenderer who turns out to not only lack the technical and financial capacity to handle the work but also operates under a system whose values are inconsistent with those of your organization. So yes, you do need to pay attention to your supplier appraisal procedure.

It is worth noting that there are two points when it comes to dealing with suppliers 1) pre-qualification, which happens at a pre-contract evaluation stage and 2) supplier performance which will fall under the post-contractual evaluation stage. Supplier appraisal falls under the first stage, the logic being to ensure that you have supplier(s) with potential to perform a contract or tender that is to be awarded, to the required standards. Do not confuse this with supplier performance appraisal in which we appraise performance of suppliers.

Ray Carter came up with the 10Cs’ model which can help when conducting supplier appraisal during the pre-qualification stages, the model works as follows.

1. Capability or Competence; is the supplier capable or competent enough to handle the contract or the tender? You have to appraise the supplier’s management aspect, their innovation capability, their designs, basically their competence to produce and deliver the kind of goods and services that you require. The assumption here is that you know what you require since at a later stage in the procurement cycle you will need these requirement to manage the contract.
2. Capacity; you have to consider whether or not the supplier has the capacity to meet your current and future supply needs, for instance if you want 5000 units of product X on a monthly basis and the supplier can only do 2500 units, that means they lack the capacity to meet your needs even though they could suggest alternatives around this. Find out how effectively the supplier manages their own supply chain.
3. Commitment; this will depend on whether you are going for long term relationship or short term, but either way you appraise suppliers values such as quality, service or cost management since these aspects generally determine how your relationship turns out
4. Control system; if things don’t go according to plan, what are the supplier’s mechanisms of managing risks? You need to find out since there could be some changes in your business context that may force your suppliers to change as well, for instance, environmental regulations that affect how you produce your products.
5. Cash; evaluate your suppliers’ financial situation specifically their working capital. remember you may not pay them monthly since most businesses tend to pay after 30,60 or 90 days, but you will expect delivery of given items on regular basis. So do they have enough cash to handle such?
6. Consistency; what is their reputation or record when it comes to delivery and improving their levels of quality and service?
7. Cost; these has to do with their price and aspects relating to the whole life costing. Is there value for the money they are asking for?
8. Compatibility; at this point you want to ensure that the supplier’s way of doing business is compatible with that of your organization, things like, business culture or even how they use technology.
9. Compliance with environmental, corporate social responsibility basically all the external factors that could become an issue to you
10. Communication; are they the kind of suppliers you can count on to be there when you call for support or any other issue regarding supply chain or are they the type that are slow to respond?

CONCLUSION

It is important to have a list of pre-qualified suppliers such that even if you have an eprocurement system for your eprocurement or any other type of procurement for that matter, you can just pick one to award the contract. This will mean that you already know that any supplier on the list is approved and is capable of fulfilling the requirements.