Vendor_Rating

Vendor rating Vendor rating is the result of a formal vendor evaluation system. Vendors or suppliers are given standing, status, or title according to their attainment of some level of performance, such as delivery, lead time, quality, price, or some combination of variables. The motivation for the establishment of such a rating system is part of the effort of manufacturers and service firms to ensure that the desired characteristics of a purchased product or service is built in and not determined later by some after-the-fact indicator. The vendor rating may take the form of a hierarchical ranking from poor to excellent and whatever rankings the firm chooses to insert in between the two. For some firms, the vendor rating may come in the form of some sort of award system or as some variation of certification. Much of this attention to vender rating is a direct result of the widespread implementation of the just-in-time concept in the United States and its focus on the critical role of the buyer-supplier relationship. Most firms want vendors that will produce all of the products and services defect-free and deliver them just in time (or as close to this ideal as reasonably possible). Some type of vehicle is needed to determine which supplying firms are capable of coming satisfactorily close to this and thus to be retained as current suppliers. One such vehicle is the vendor rating. In order to accomplish the rating of vendors, some sort of review process must take place. The process begins with the identification of vendors who not only can supply the needed product or service but is a strategic match for the buying firm. Then important factors to be used as criteria for vendor evaluation are determined. These are usually variables that add value to the process through increased service or decreased cost. After determining which factors are critical, a method is devised that allows the vendor to be judged or rated on each individual factor. It could be numeric rating or a Likert-scale ranking. The individual ratings can then be weighted according to importance, and pooled to arrive at an overall vendor rating. The process can be somewhat complex in that many factors can be complementary or conflicting. The process is further complicated by fact that some factors are quantitatively measured and others subjectively. Once established, the rating system must be introduced to the supplying firm through some sort of formal education process. Once the buying firm is assured that the vendor understands what is expected and is able and willing to participate, the evaluation process can begin. The evaluation could be an ongoing process or it could occur within a predetermined time frame, such as quarterly. Of course the rating must be conveyed to the participating vendor with some firms actually publishing overall vendor standings. If problems are exposed, the vendor should formally present an action plan designed to overcome any problems that may have surfaced. Many buying firms require the vendor to show continuing improvement in predetermined critical areas. CRITERIA FOR EVALUATION Vendor performance is usually evaluated in the areas of pricing, quality, delivery, and service. Each area has a number of factors that some firms deem critical to successful vendor performance. Pricing factors include the following: * Competitive pricing. The prices paid should be comparable to those of vendors providing similar product and services. Quote requests should compare favorably to other vendors. * Price stability. Prices should be reasonably stable over time. * Price accuracy. There should be a low number of variances from purchase-order prices on invoiced received. * Advance notice of price changes. The vendor should provide adequate advance notice of price changes. * Sensitive to costs. The vendor should demonstrate respect for the customer firm's bottom line and show an understanding of its needs. Possible cost savings could be suggested. The vendor should also exhibit knowledge of the market and share this insight with the buying firm. * Billing. Are vendor invoices are accurate' The average length of time to receive credit memos should be reasonable. Estimates should not vary significantly from the final invoice. Effective vendor bills are timely and easy to read and understand. Quality factors include: * Compliance with purchase order. The vendor should comply with terms and conditions as stated in the purchase order. Does the vendor show an understanding of the customer firm's expectations' * Conformity to specifications. The product or service must conform to the specifications identified in the request for proposal and purchase order. Does the product perform as expected' * Reliability. Is the rate of product failure within reasonable limits' * Reliability of repairs. Is all repair and rework acceptable' * Durability. Is the time until replacement is necessary reasonable' * Support. Is quality support available from the vendor' Immediate response to and resolution of the problem is desirable. * Warranty. The length and provisions of warranty protection offered should be reasonable. Are warranty problems resolved in a timely manner' * State-of-the-art product/service. Does the vendor offer products and services that are consistent with the industry state-of-the-art' The vendor should consistently refresh product life by adding enhancements. It should also work with the buying firm in new product development. Delivery factors include the following: * Time. Does the vendor deliver products and services on time; is the actual receipt date on or close to the promised date' Does the promised date correspond to the vendor's published lead times' Also, are requests for information, proposals, and quotes swiftly answered' * Quantity. Does the vendor deliver the correct items or services in the contracted quantity' * Lead time. Is the average time for delivery comparable to that of other vendors for similar products and services' * Packaging. Packaging should be sturdy, suitable, properly marked, and undamaged. Pallets should be the proper size with no overhang. * Documentation. Does the vendor furnish proper documents (packing slips, invoices, technical manual, etc.) with correct material codes and proper purchase order numbers' * Emergency delivery. Does the vendor demonstrate extra effort to meet requirements when an emergency delivery is requested' Finally, these are service factors to consider: * Good vendor representatives have sincere desire to serve. Vendor reps display courteous and professional approach, and handle complaints effectively. The vendor should also provide up-to-date catalogs, price information, and technical information. Does the vendor act as the buying firm's advocate within the supplying firm' * Inside sales. Inside sales should display knowledge of buying firms needs. It should also be helpful with customer inquiries involving order confirmation, shipping schedules, shipping discrepancies, and invoice errors. * Technical support. Does the vendor provide technical support for maintenance, repair, and installation situations' Does it provide technical instructions, documentation, general information' Are support personnel courteous, professional, and knowledgeable' The vendor should provide training on the effective use of its products or services. * Emergency support. Does the vendor provide emergency support for repair or replacement of a failed product. * Problem resolution. The vendor should respond in a timely manner to resolve problems. An excellent vendor provides follow-up on status of problem correction.