Evaluating supplier performance is an integral part of ISO 9001:2015 certification, according to Chapter 8.4 named “Control of externally provided products and services,” in ISO 9001:2015. There is no specific format or template. Companies can make their templates that meet most of the mandatory needs.
Companies often tend to miss the essential requirements of ISO 9001:2015 that needs to be fulfilled when it comes to supplier evaluation. Before suppliers’ evaluation, it is of vital importance to devise a criterion to pick and choose the correct supplier for your business.
Categories’ of Suppliers for Evaluating Supplier Performance
Suppliers can be divided into the following categories:
Essential supplier is one which meets with the primary deal requirements along with competitive pricing. Risk sharing between the business and supplier would be minimal.
Value Added Supplier
Value-added supplier is one which impacts your operational efficiency that can give improvement suggestions along with modest risk-sharing incentives and penalties.
Preferred supplier is one who owns process expertise and can commit cost improvement probably by E-procurement. However, risk sharing is moderate, with significant incentives and has a multi-year option with various price guarantees.
Strategic supplier is one which offers unique advantage through his mastership and possesses the complete capabilities to assist with rapid market changes and customer demands.
However, the pricing is more inclined towards customer commitment by sharing pricing model to set up significant profit margins with compensation being tied to buy firms successes by making joint investments.
Supplier Selection Criteria according to ISO 9001:2015
Half of the hassle can be avoided by choosing the right type of supplier and to do it in the very first attempt is a difficult task to do.
However, ISO 9001:2015 can be of great help while choosing the best supplier for you because ISO 9001:2015 has provided guidelines and standards to choose most competent supplier relevant and useful for your business.
ISO 9001:2015 set a criterion that does prescribe a definite setup to choose the most appropriate supplier for your business but first it is essential to evaluate your existing suppliers but why there is a need to evaluate existing suppliers. The main reasons are:
- Compliance: it is crucial to check compliance adherence of your supplier, and the outcome of such compliance audits should only become quality competitive.
- Financial Stability: Financial stability is one of the essential factors because regular checks over financial situations are one of the best ways to avoid risks.
- Delivery Lead times with High-Quality Results: Another most critical performance indicator is delivering high-quality results by meeting prescribed deadlines.
- Ability to Become a Business Partner: To become a business partner with each other, you both should have the ability to develop a mutually benefited relationship which will ultimately improve the level of quality outcomes delivered to your business.
Evaluating the Supplier
Evaluation of suppliers is one of the prominent and vital steps. You can design a scorecard closely matched with your business needs, and with the help of the scorecard, you can assess suppliers’ level of business. Just in case if the supplier has gone extra miles to provide you raw material to save you from production losses, then such point should be noted.
For worst case scenarios, if the supplier is not able to fulfill your production needs, then you need to have criteria when the supplier is not fulfilling the business needs. Either you have to limit the suppliers, or you have to make that supplier a backup supplier, not a leading supplier.
What you have to look forward is to have a mutual business partner having mutual business interests with an outcome of business protection from both the ends. Hence, ISO 9001:2015 does not only define quality systems for business but have prescribed quality guidelines for suppliers too.
The specific requirements of supplier evaluation, as defined in ISO 9001:2015, can be stated as follows:
- Subclause of 7.4 “Purchasing”: The sub-clause of 7.4 in which the requirement has been highlighted to select and evaluate suppliers to be based only on the capability to supply their products to your business. ISO 9001:2015 defines the criteria to choose, evaluate, and re-evaluate the suppliers with its records, results, and actions taken being recorded.
- Subclause of 8.4 “Analysis of Data”: The sub-clause of 8.4 in which the requirement for the organization has been highlighted to determine, collect and analyze relevant data about suppliers to evaluate the effectiveness of QMS (Quality Management System) and monitoring of continual improvement system.
Suppliers, that are Critical for your Business
ISO 9001 standard has devised many useful ways to evaluate your supplier fairly. Few suppliers can be very critical for your business, and their importance depends upon how much your business is dependent on availability from your suppliers.
Evaluation Criteria for Selecting Most Appropriate Supplier
Here enlisted are the most critical factors for Evaluating Supplier Performance criteria:
- Service Level
- Risk Potential
- Potential to Innovate
- Lead times
- Number of Complaints
As a business stakeholder, one needs to do a 360-degree market survey before finalizing any supplier.
After supplier evaluation, one must have to divide the suppliers into categories (the same categories mentioned above), and it is not necessary for the suppliers to get selected in your selection process. It is perfectly fine even to blacklist a few suppliers based on past experiences and their market history.
Making the Best of Supplier Evaluating Supplier Performance
To make the best of evaluating supplier performance, one can either have customized scorecard relevant to business needs.
A documentation database based on a digital system can be of great assistance to the type of businesses that requires numerous suppliers’ services.
By making expert use of the digital system, one can get various benefits like:
- A systematic approach to supplier evaluation
- Convenient analysis methodology with flawless results
- Result sharing with speed
- Digital evaluation process giving unbiased results
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