Supplier Measurement - Self Assessment

[Urbanis (QS)]

Izak,

Your comments and referrals proved hugely rewarding in the presence of the now approved empowerment charters and we look forward to both phases of implementation.

[LANCE]

Originally Posted by bernievn

The intensive effort involved in Supplier Performance Measurement is a major hurdle for some procurement professionals. As a result they sometimes give up on the leading practice purely because they do not have the resourses / time to do this.

It seems that quite a few companies are now instructing suppliers to measure themselves and then report back to the buying company on this.

Is this a workable solution? What if the supplier is dishonest about their performance?

Suppliers needs to be evaluated regularly, e.g. bi-quarterly or whatever period suites your organisational requirements. This enables procurement to foster better supplier relationships and gian best prices, turn around times and most importantly not compromising quality.

The purpose of having a supplier performance measurement is:

To ensure that the goods and services as required by an organisation in fulfilment of its stated objectives are procured in the optimal quantities and qualitative, at the optimal time, in the most economical terms from reputable service providers suppliers; Therefore an organisation's procurement system must be consistently fair, equitable, transparent, competitive and cost effective;

All of the above should be driven by a well-structured Procurement Policy.

Hence I disagree completely with organisations that say their suppliers must evaluate themselves. If they say this because of time constraints and capacity, then they must plan timeously and capacitate their procurement divisions and hence they will see the benefits. (adding to the bottom line)

[Themba Ntuli]

bernievn,

supplier evaluation is an intergral part of strategy formulation.Not just strategy but sustaineable relatioships/ external collaborations.Once you have mapped all your commodities groups and your Bills of materials,Conducted your spent analysis you will then have to decide on your contracting strategy.At this point it is impotant to ensure that you short list the right suppliers to be competable and be able to support your strategy to drive value.The supplier must be screaned for capability to can fulfill contractual obligations.Once you have contracted,obviously depending on commodity criticallity and cost ,you would then have regular meetings with your supplier to ensure that you continue to unlock value in the chain.

Maybey for strategic commodities this would be more relevent but every company should ensure that every supplier is evaluated before they are loaded on the data base and those companies needing development are actually assited financially,technically etc.

What is of importance is that you need to have total visibility of your supply chain from routine to strategic commodities and their vendors.

[Izak]

Themba what you say is very relevant but implementing it is a totally different story....trust me
What should ideally happen is to have a pre-qualification round (where basic details ie. tax clearance company reg etc. is checked) and then a verification round (where it is verified that the supplier actually fits all the credentials as were claimed by them ie. Equity, services / comm_cats).
We do the first part through a Supplier management package where questionnairres are sent out to identified suppliers.
In the second process one has to implement a verification process and also after that call in the help of someone like SEDA to help and develop the identified suplliers' services.
After that it is up to your organization to keep the suppliers on their toes with service delivery and also the updating of relevant information.

[Izak]

Originally Posted by Urbanis (QS)

Izak,

Your comments and referrals proved hugely rewarding in the presence of the now approved empowerment charters and we look forward to both phases of implementation.

Just the greatest pleasure!!

[Jacques Fourie]

Originally Posted by bernievn

The intensive effort involved in Supplier Performance Measurement is a major hurdle for some procurement professionals. As a result they sometimes give up on the leading practice purely because they do not have the resourses / time to do this.

It seems that quite a few companies are now instructing suppliers to measure themselves and then report back to the buying company on this.

Is this a workable solution? What if the supplier is dishonest about their performance?

In South Africa ? Not at this stage

[bernievn]

If you make "audit rights" part of your contract, where you are able to on basis determined by your company do spot checks on the supplier generated data... with consequence attached to misreporting, it can be done..

[Izak]

I agree with you Bernie it is definately workable with the proper control measures in place as you suggested.
The problem is that if you have to measure/evaluate supplier performance/ability yourself it will be a hugely resource intensive operation.
We have had companies like BHP Billiton use our Supplier Management Questionairres with great success.
But obviously the right controls have to be put in place to prevent dishonesty.

[Gregg Barrett]

Everyone has got valid points here, but i think it comes down to the point that Bernie made earlier:

"The intensive effort involved in Supplier Performance Measurement is a major hurdle for some procurement professionals. As a result they sometimes give up on the leading practice purely because they do not have the resourses / time to do this.

With the correct "tools" for the job it can be done efficiently and effectively and when this is the case organisations realise alot of value.

Even when you pass things over to the supplier because of resource contraints dont bet on the supplier having a whole lot of resources in place to do the job either. Remeber they are also in business and dont just have extra resources wondering around the place. People always fail to consider that if you pass on your practices to the supplier, you need to evaluate the cost implication of such an approach. Because i can guarantee you that the supplier will pass those costs on to the customer organisation.

[Jacques Fourie]

.. I see this in the same light as self assessment when it come to staff appraisals. In the timeframe of implementing this (about 8 months) not one of the self assessments reflected true performance and I had to re-assess and actually do some damage control - in some cases had to tell a staff member (who assessed himself as being able to walk on water) that he/she is performing below required levels and should the current level of performance continue we would have a problem

Do you not think this will be the same with Suppliers? As you will start to manage re-active (to performance issues) in stead of pro-active management.

After this, seeming long winded reply, I do think that self assessment (supplier measurement) has its place but only as a guideline to the suppliers - to determine if they are on track and in line with expectations. An outside party would still need to objectively measure performance.

Supplier measurement will always be one of the fields we will actively engage in finding solutions and investigate alternative ways of doing it.