Tips for Evaluating Supplier Performance According To ISO 9001
Evaluating supplier performance is an integral part of the ISO 9001:2015 certification process, according to Chapter 8.4, “Control of externally provided products and services.” There is no specific format or template. Companies can make templates that meet most of the mandatory needs.
Companies tend to overlook some of the essential requirements of ISO 9001:2015 that need to be fulfilled for supplier evaluation. Before suppliers’ evaluation, it is vital to devise a criterion to pick and choose the correct supplier for your business.
ISO 9001:2015 Supplier Selection Criteria
Half of the hassle can be avoided by choosing the right type of supplier. However, to do it in the first attempt is a difficult task to accomplish.
ISO 9001:2015 can be of great help while choosing the best supplier for your company because it has provided guidelines and standards to follow for selecting the most competent, relevant, and helpful supplier for your business.
ISO 9001:2015 sets a criterion that does prescribe a definite setup for choosing the most appropriate supplier for your business, but first, it is essential to evaluate your existing suppliers. Why is there 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 critical performance indicator is delivering high-quality results by meeting prescribed deadlines.
- Ability to Become a Business Partner: To become business partners, you both should have the ability to develop a mutually beneficial relationship, which will ultimately improve the level of quality outcomes delivered to your business.
Supplier Performance Evaluation Criteria
Listed below 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 divide the suppliers into categories (the same ones mentioned above), and the suppliers don’t need to be selected in your selection process. It is perfectly fine even to blacklist a few suppliers based on past experiences and their market history.
The Supplier Evaluation Process
Evaluation of suppliers is one of the most prominent and vital steps in the certification process. 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. If the supplier has gone extra miles, for example, to provide you raw material to save you from production losses, such points should be noted.
For worst-case scenarios, if the supplier cannot fulfill your production needs, you need to have criteria in place to cover when the supplier is not fulfilling the business needs. Either you have to limit the suppliers or make the supplier a backup supplier, not a leading supplier.
What you have to look forward to is having a mutual business partner with mutual business interests and an outcome of business protection from both ends. ISO 9001:2015 does not only define quality systems for business but prescribes quality guidelines for suppliers too.
The specific requirements of supplier evaluation, as defined in ISO 9001:2015, can be stated as follows:
- Subclause of 8.4 “Purchasing”: The sub-clause of 8.4, in which the requirement is highlighted to select and evaluate suppliers 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 while recording its records, results, and actions.
- Subclause of 9.1 “Analysis of Data”: The sub-clause of 9.1, 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.
Making the Best of Evaluating Supplier Performance
To make the best of evaluating supplier performance, one can have customized scorecards relevant to business needs.
A documentation database based on a digital system can significantly assist businesses that require 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
Supplier Categories in the Performance Evaluation Process
Suppliers can be divided into the following categories:
Basic supplier (or essential supplier) is one that meets with the primary deal requirements along with competitive pricing. Risk-sharing between the business and supplier would be minimal.
Value-added supplier is one that impacts your operational efficiency and 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. It also has a multi-year option with various price guarantees.
Strategic supplier is one that offers a unique advantage through mastership and possesses the complete capabilities to assist with rapid market changes and customer demands.
The pricing is more inclined towards customer commitment by sharing a pricing model that sets up significant profit margins. Compensation is tied to buying firms’ successes by making joint investments.
Evaluating Supplier Performance Fairly
ISO 9001 standard has devised many valuable 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.
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