Vendor Rating

Description of Vendor Rating. Explanation.

Definition Vendor Rating. Description.

Vendor Rating (also called: supplier rating) is a system used by buying organizations or industry analysts to record, analyze, rank and report the performance of a supplier in terms of a range of predefined criteria, which may include such things as:

Quality of the product or service
Delivery performance and reliability
Cost, price
Capabilities
Service
Financial continuity of the firm

The method includes defining the criteria and the weight each criterion receives in the overall result, development of the questions and questionnaires, actually carrying out the measurements, and finally interpreting the results. If vendor ratings are carried out periodically or even ongoing, the results (per vendor) can be analyzed and compared over time.

Benefits of Vendor Rating

Clear and objective overview of performance of suppliers
Enables better vendor management
Incidents and escalations can be monitored earlier
Suppliers are stimulated to improve their performance
In the case of periodical vendor rating: analyze trends in vendor performance

Objective and Subjective Vendor Rating

Broadly 2 types of supplier rating can be distinguished:

Objective vendor rating (based on lead times, costs, number of service calls, etc.)
Subjective vendor rating (based on opinions, experiences and perceptions about suppliers)

Supplier Rating, Assessment, Evaluation and Ranking

These terms are all closely related and similar, but:

Vendor Evaluation
- Is a process carried out after the product is delivered or the service is rendered.
- Can indicate a continuous process of measurement, usually comprehensive.
Vendor Rating
- Can be used before or after order fulfillment.
- Is usually used with reference to a scale.
- Is an approach of comparing various or multiple vendors.
Vendor Assessment
- Usually indicates a one-time process.
- Typically used for one particular vendor.
Vendor Ranking is the end result of the above processes.

Vendor Rating Forum (9)

Supplier Relationship Management
"Cultivate a good relationship with suppliers so that they can contribute to the improvement of quality.
Supplier relationship management is important to the company's quality programs. The suppliers should be trained so that they know the changing needs of the firm they are dealing with and at the same time they are enabled to improve the quality of their products.
Suppliers should be reviewed regularly, so that those who are not meeting the specifications can either commit to improvement or give way to other suppliers who can deliver quality products.
Firm's should audit their suppliers regularly to ensure that they are constantly maintaining high quality standards.
Firm's who are sourcing supplier should not compromise quality with cheap price. The supplier should be able to deliver quality products at a better price."

Tips on Supplier Evaluation
"Beyond the 4 purchasing categories described by Kraljic, how do I go about evaluating suppliers? What are the main steps and what are the pitfalls that should be avoided?"

Gradually Evaluate Suppliers
"There are many suppliers in our company. When we were audited by a certification body, the auditor recommended to gradually evaluate suppliers. He got it as a observation finding. Therefore, how to evaluate the suppliers gradually? Any suggestion?"

Objective Vendor Evaluation and Appraisal
"Whenever vendor evaluation has been done by any organization, the results should be captured in key performance indicators within a specified period of time. Without this, a lot of subjectivity will still find its way into the whole process."

Vendor Rating must be Fair
"Vendor rating needs a system which is fair between vendors. We should ask ourself what is the priority? Price or performance? It is difficult to get the lowest price with the best performance/quality."

Disadvantages of Vendor Rating; Where it is Difficult to Use
"When limited sourcing (very few or only 1 supplier) is available, the use of the vendor rating is counter productive."

Vendor Rating Usages
"Any organization who carries out any activities to meet customer requirements expects information on his performance. Vendor rating meets this with respect to the supplier performance. Supplier improvement can be measured and monitored and rewarded on the basis of the supplier rating on a continual scale. Deleting a supplier from the approved supplier list can also be done on the basis of supplier rating. Supplier is always aware of his performance on various criteria and weightages."

Vendor Rating needs Benchmark
"Vendor ratings are important but they are only practical if a benchmark is available. The availability of the benchmark itself can make a marked difference in the output quality of vendors. Also of equal critical importance is co-ordinated vendor development programmes that ensure that product quality output is not only maintained but excelled."

Vendor Rating for New, Potential Vendor
"I'd like to understand how should one can create a first vendor rating procedure for new suppliers (not yet present into the supplier list). It should be useful to use not only financial KPI (debtness ratio, turnover, cash to cash cycle, etc..), but also operational ones. Could someone give me an idea?
Thanks all for sharing comments"

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