Evaluating suppliers: criteria, scoring model and an example scorecard

Why do you evaluate suppliers?

A supplier who delivers late or makes mistakes becomes your complaint. That applies to materials, but also to subcontractors, transport, inspection bodies and temp agencies. An evaluation shows whether a party is reliable before things go wrong, and records why you keep working with them.

ISO 9001 too is built on the idea that you control what you obtain from outside, in proportion to the risk. So evaluation does not have to be equally heavy for every supplier. That first requires a distinction in how important a supplier is to you.

First decide: which suppliers are critical?

Classify your suppliers by the effect of a setback. A critical supplier directly affects the quality of your product, the safety of your people or your legal obligations, and is hard to replace. An important supplier has a noticeable effect but can be replaced. A standard supplier delivers something you can buy anywhere.

That way you spend most attention on the small group that really matters. A supplier of office supplies does not need a scorecard, a subcontractor working on your construction site does. The smaller the group of critical suppliers, the better you can really follow them.

A critical supplier also gets a heavier introduction: relevant certificates, references, agreements on reporting deviations and, where it fits, a visit or audit at the supplier. Record the classification and the reason, so that in an audit you can explain why you put in more effort for one supplier than for another.

Which criteria do you use?

Choose a limited number of criteria that suit what your supplier delivers, and make them as objective as possible. Data from your own administration, such as delivery dates and reports, are more reliable than a gut feeling. If a criterion does not fit a supplier, leave it out. Commonly used criteria:

• Quality of what is delivered: number of deviations, rejections and rework
• Delivery reliability: does the party deliver on time, in the right quantity and complete
• Communication and complaint handling: does the supplier respond quickly and resolve issues
• Safety and compliance: valid certificates, required inspections and safe conduct on site
• Price and total costs, optionally supplemented with sustainability

A scoring model you can explain

Give each criterion a score on a simple scale, for example 1 to 5, and a weight that fits its importance. For a critical supplier, safety counts more than price. Keep the calculation rules simple enough for a supplier to check them themselves.

Link a status to the total score: approved, conditionally approved or rejected. Set the limits in advance so the outcome does not depend on who does the evaluation. Record who evaluates and always let someone from purchasing and someone from operations take part.

Example of a scorecard

Below is a fictional example for a supplier of building materials, with scores from 1 to 5. The weighted total is 3.85 out of 5 (0.4 x 4 plus 0.3 x 3 plus 0.15 x 5 plus 0.15 x 4). If you approve from 3.5 and reject below 2.5, this supplier is approved, with delivery reliability as a point of attention for the conversation.

• Quality (40 percent): score 4, two deviations in the past year's deliveries
• Delivery reliability (30 percent): score 3, a few late deliveries
• Communication and complaint handling (15 percent): score 5, always responded quickly
• Safety and documents (15 percent): score 4, certificate valid, one document temporarily missing

How often do you evaluate?

Frequency follows risk. Evaluate critical suppliers at least annually, important suppliers annually or every two years and standard suppliers only when there is a reason. Evaluate a new supplier beforehand, before you put them on the list, for example based on references, certificates and a trial order.

In addition, an evaluation in between must be possible, for example after a serious deviation, an incident or a complaint whose cause lies with the supplier. Then do not wait for the annual round. Record those triggers in advance in your procedure, so it does not become a one-off decision.

The approved supplier list

You collect the outcomes in a list of approved suppliers. For each supplier it states: what they may deliver, the status, the date of the last evaluation, the date of the next one, the expiry dates of certificates and a contact person. That way you see at a glance who is ready for a new order.

Agree that purchasing only orders from suppliers on the list for critical categories, and who may add a new supplier. A list that nobody maintains is worse than no list. Go through it at least once a year for expired certificates and suppliers you no longer work with.

What do you do when a supplier disappoints?

A low score is a reason for a conversation, not for an email. Describe the deviations with data, let the supplier respond and make agreements with a deadline. Also share the outcome when things go well: suppliers who know how they score improve faster.

If the supplier is hard to replace, because they are the only one or because switching takes a lot of time, start working on an alternative before things go wrong, such as a second source or extra stock. In case of a setback, work like this:

• Record the facts with dates, numbers and evidence
• Ask the supplier for the cause and an improvement plan with a deadline
• Set the status to conditionally approved and agree on a next measurement moment
• Check whether the problem is really gone, not just whether the plan was received
• If there is no improvement, look for an alternative and remove the supplier from the list

How BrydgeOne supports this

Supplier management helps you evaluate and monitor suppliers. You record supplier deviations in Quality reports. Requirements and agreements you share with suppliers, you manage in Document management with one current version, and with Audits you plan internal audits to check whether your own evaluation process is followed.