How do you evaluate a new supplier?

Posted by Jamie Robertson on June 6, 2017

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Identifying new suppliers to work with is always a hard decision to make. Even the combination of a recommendation from an industry colleague, and the supplier’s ability to showcase their capability, isn’t enough to make you sure that the new partnership will be successful.

While many companies take a calculated risk by appointing a new supplier, unsure whether problems will occur further down the line; there is a three-step framework that can help companies better appoint new suppliers – and ensure they are meeting standards long into the future.

The Altius supply chain performance framework is a great tool that pins new, and existing suppliers too, down to three key areas: capability, management and monitoring. Here we give a brief explanation of the framework and how it can help you.

Capability

Judging the capability of your suppliers gives your business a clear indication of their skills and experience. Failure to do this could result in you employing a company that cannot maintain the high quality of service you expect, putting your company and supply chain in danger of falling below standards.

To judge supplier capability effectively, you should:

• Be clear on the information you need initially from each supplier, based on the work they carry out. Make it as easy as possible for them to submit the information to you, and where possible, used closed questions to gain clarity.
• Get Verification of the suppliers’ industry certifications and other regulatory paperwork to validate they are capable to work for you. Use a robust and thorough IT system to collate this information and remember that certifications do expire, ask yourself how you will keep on top of this in order to protect your business.
• ‘Spread the word’ once a supplier is authorised make sure everyone in your business knows that they are approved and are available to use, especially your procurement team. Remember to let the supplier know too so they can be ready for your call.

Management

The job of managing compliance extends well beyond the basics of information and evidence gathering for authorisation to work. Ongoing management of suppliers is required to ensure that contractual compliance is adhered to. For new and existing suppliers, you should be giving them the relevant policy, rules and specifications to help them stay compliant. Your job at this stage is to monitor that they are doing this correctly and on time.

To manage new suppliers effectively, you should:

• Create policies that clearly explain what you want to see from each supplier. Communicate these regularly so suppliers are familiar with them and ensure you have a system or procedure in place to share these policies as well as having the ability to collect ‘acknowledgements’ once the supplier has read and understood the documents.
• Clearly communicate what you expect new suppliers to deliver and what they should not be doing. Include everything, from the timescales of the work, to the behaviour you expect from their staff. Make sure they understand these controls, for example, site access rules, before they start and record that they’ve agreed to them.

Monitoring

To ensure that your supplier abides by your contractual agreements and meets their targets, you need to have a system in place so that you can monitor their progress continually. This can be in the form of an audit which will assist in identifying areas for improvement; it can also assess the performance of your suppliers, which is crucial to maintaining high standards.

To monitor and evaluate the performance of a new supplier, you should:

• Observe suppliers whilst they are working for you. Give feedback and praise for good behaviour to encourage them to continue working in the right way.
• Consistently Audit to check the progress of new suppliers and ensure they are following the agreed processes.
• Use KPIs to provide routine feedback on how your suppliers are doing. Look for trends over time and assess whether the new supplier is achieving what you expect. Make sure these results are shared with suppliers so they understand where they can improve.

Best practice to manage new suppliers

Managing new and existing suppliers effectively is hard to balance, so here is a three-step framework to help you effectively evaluate new suppliers.

For more advice on managing new suppliers, take a look at our Introduction to Supply Chain Compliance Best Practice here.