VENDOR

EVALUATION
Definition

 Vendor Evaluation is a process of valuating the

vendors based on some criteria, ratings.
 It is a process of monitoring the quality of
supplier’s work/roles/delivery of services.
 It is an ongoing process to measure the
performance and for ensuring less risks, contract
compilability .
Process of Vendor
Evaluation
 Process through KPI’s
 Devising an evaluation model/design
 Classification of multiple suppliers
Criteria Involved

 Criteria may include pricing, quality, delivery.

 Pricing includes billing cycle, cost adaptiveness,
pricing factors, pricing consistency,
competitiveness
 Quality, as the word says that it includes the
amount of quality which is included in the
product or the delivery mode of the products
etc.,
WHAT IS QUALITY

 Quality can be defined as the standard of something.

Quality in general terms means of good quality.
 For a vendor service to be called as a good quality
service, it should comprise of warranty and guarantee,
durability, reliability, adherence to
conditions/specifications, compliances with purchase
order, customer vendor relationship in good terms,
availability of services during urgent requirements, good
condition of the product/services etc., The said above
points are framed as per the theory of quality
management.
 Also it includes of costs, consistency, commitment,
competency.
 Quality also includes the method of problem resolutions.
 Quality includes the technical knowledge about the
goods/services rendered.
Factors to be included in
Delivery of goods/services
 Delivery means the delivery of goods/services which implies the delivery of
right goods/services at the right time and at the right place.
 Delivery factors includes the following:
a) Lead time required for delivery
b) Supply during emergency conditions
c) Consideration of high level and low level
customers
d) Delivery in good packaging conditions
e) Documentation including the technical slips,
invoices, packing details, technical manuals
f) It includes the confirmations with the order
g) Exchange of goods against wrong delivery/low quality goods.
h) Sincerity to serve.
i) Courtesy while delivery of goods/services
Vendor evaluation based
on turnover
 This measurement has been developed as off-late
requirements. It measures the capacity of the
vendor to supply goods/services. Folllowing can be
considered a few of the factors for the above
measurement.
a) Based on activity based financial ratios like
profit volume ratio, profitability ratios,
liquidity ratios, cash rich volumes
b) Comparison of supplier considering the
average level in industry
c) Vendor’s production capacity
d) Vendor’s performance in business
e) Calculation of vendor’s risk bearing capacity
Vendor evaluation based
on GRN and Inspection
 Inspection includes the physical inspection and the quality
etc., about the goods.
 Inspection is based on some basic criteria as set up by the
client.
 It might be of historic standards.
 It might be based on precalculated standards.
 It might be set on some pre-requisites.
 Inspection pre-requisites may be as per following
considerations.
For example the following quality standards might be
Standards Rating
>90%<100% 1 Accepted
>80%<90% 2 Accepted
<80% 3 Rejected
Vendor Evaluation based on
Audit Trails/Audit checklist
 Vendor audit should be conducted atleast once
every year.
 It includes surprise visits to vendor’s warehouse,
manufacturing premises.
 It includes checking of his records and appraising
it.
 It includes the process of planning, audit
management, reporting and reviewing
General Formula as used
in RITES company
 S=0.6Qr + 0.4d

S=Supplier rating

Qr=Quality rating

d=Delivery rating

Qr=Qa / Qs

Qs=total quantity supplied/qty offered for inspection= Qa+Qrr+Qcr

Qa=Qty accepted

Qrr=qty rejected during RITES inspection

Qcr=Qty rejected during consignee inspection

Delivery rating=d=Qt + sumof Qcr(1-k * Td/Ts)/Q

Q=qty ordered

T=promised delivery time

Qd=Qty delayed

Td=time delayed for qty delayed

K=2 as constant