Supplier evaluation: The two most common methods

External suppliers of raw materials and products play an important role for many companies, since this happens at the beginning of the supply chain. In order to guarantee reliable, high-quality and timely deliveries, regular supplier evaluation is worthwhile. This lets you know which suppliers meet the requirements, perform particularly well or have major weaknesses.

Supplier evaluation as part of quality control

Quality control involves various processes which are recorded and evaluated, and sometimes even optimised, as a result of the evaluation. The evaluation of suppliers is an essential part of this, as set out by the British Standards Institution (BSI). For companies, supplier evaluation makes the quality of their suppliers' capabilities more transparent. Here, different suppliers can be easily compared against each other or assessed on the basis of different criteria. The focus is on objective evaluation, and the aim is to identify any potential weaknesses and develop targeted measures to improve them.

Criteria for assessment: not prescribed, but often similar

Various criteria come into consideration for the evaluation of suppliers, beyond those set out by the BSI. They depend on the specific company and their particular priorities. Generally speaking, the following criteria are defined in more detail:

Price and payment conditions
Quality of raw materials/products supplied
Frequency of possible errors or delays
General reliability

Reliability includes meeting agreed delivery dates and the risk of failed delivery, as well as the sustainability of the packaging and flexibility. A further aspect that can be important in the course of the supplier evaluation is the availability of the supplier. This can be defined, for example, by the proximity of the location to the supplied company or by different, widely spread branches.

Goals and benefits of supplier evaluation

The first goal of supplier evaluation is to optimise the supply process. The performance of a supplier can be checked regularly and presented transparently in the form of a table or questionnaire. Weak points can be seen at a glance, and possible solutions to address errors become more apparent — a further goal of supplier evaluation.

In addition, the supplier relationship can be maintained and developed through regular, objective and honest evaluation. For example, if a supplier often makes mistakes, is unreliable when meeting deadlines or is sloppy when it comes to secure packaging, the problem can be addressed directly or the supplier can be changed immediately. In some cases, a direct comparison of different suppliers also helps to select the one who is ahead in overall standings for future deliveries.

Methods for evaluating suppliers

There are various methods that help to carry out supplier assessments. Two are used particularly frequently: the point evaluation method and profile analysis.

The point evaluation method at a glance

In the point evaluation method, suppliers receive points or grades from people who can assess the individual criteria, i.e. are in direct contact with the evaluated supplier or, for example, monitor their delivery times.

Creation/application: In order to use the point evaluation process, a list of important evaluation criteria for selecting suppliers is first created. The individual criteria then need to be weighted. The sum of the weights is 100. If the weighting is not immediately clear, it can help to compare two criteria and determine which of the two is more important in each case. Points from one to ten are then awarded in the defined categories. If, for example, category A is now generally weighted by 10% and a supplier has received 8 points here, the result is a total score of 10 (maximum points criterion A) * 80% (achieved value of category A) = 8 points.
Benefits: One advantage of the point evaluation procedure is that it is easy to use and can be performed by practically any layperson. In addition, it’s possible to have a clear separation of the individual criteria and an independent evaluation of them.
Disadvantages: The mostly subjective assessment of each evaluator is considered a disadvantage; also, suppliers are not clearly compared with each other. The rating is based on the individual, evaluated categories. A weighting of the individual criteria is absolutely necessary.

Profile analysis at a glance

The profile analysis does not weigh the criteria for evaluation differently. There is also no final performance evaluation. In fact, it offers a direct comparison of two or more suppliers by creating a performance profile. It shows strengths and weaknesses as well as the requirements that a company places on its suppliers.

Creation/application: To perform the profile analysis, a matrix is created in the form of a table. As with the scoring process, different categories are used. There are then various rating levels, ranging from “-3” to “0” to “+3”. “0” means the company's minimum standards for the category described. It is then checked which conditions are met by which supplier. When preparing the table, the company sets out what the selected values stand for. For example, “-3” could illustrate a complete disregard of the criteria by the respective supplier, while “+3” marks a particularly outstanding achievement in this area. Care should be taken to ensure that the assessment is comprehensible and explainable. For example, the evaluator can focus on key figures. At the end of the evaluation or comparison, the points received by an individual supplier can be added up. A supplier whose points are mostly in the “+” figures wins in comparison to the other evaluated suppliers and should be the preferred supplier in the future.

NB: It should always be possible to explain the classification of a supplier on the scale, preferably using objective evidence, including key figures.
Benefits: It enables a direct comparison of suppliers at a glance and simplifies the selection of future suppliers. In addition, the table shows the results very clearly, especially if a different colour is selected for each supplier.
Disadvantages: Individual categories cannot be weighted — all of the suppliers' criteria are considered equally important in the evaluation. Selection of the method for supplier evaluation.

The supplier evaluation method should be selected depending on the company and the overall goal of the evaluation. If an individual supplier needs to be evaluated comprehensively and as quickly as possible, we recommend a point evaluation procedure in which points or grades are awarded. If several suppliers need to be compared, profile analysis, which weights all assessed criteria equally, is most suitable.