Effective Supplier Appraisal: Don’t Leave it to Chance

The product or service that any business delivers is only as good as the ingredients that make it up. You can have the best restaurant in the world, but it won’t be successful if the steaks are substandard, overpriced or constantly unavailable. The same applies to any business that relies on its supply chain to meet or exceed customer expectations.

Having the right suppliers in place is clearly vital from a quality assurance perspective. But more than that, it directly influences all three metrics on the project management triangle, these being quality, speed, and cost.

What Is Supplier Appraisal?

Selecting the right suppliers means taking all these factors into account and more. Furthermore, we see in our day to day lives that it is not a one-off process. In a personal context, most of us reappraise our insurance suppliers each year to get the best deal on price, and we might find that a particular supermarket sells better quality strawberries when they come into season.

The same applies in a business setting. Every company has its own specific needs from suppliers. Sometimes there will be a wide choice, while in more specialized areas, the sudden loss of a supplier could lead to business interruption, with potentially catastrophic consequences.

In either case, supplier appraisal needs to be an ongoing process that is revisited cyclically. But what specifically are we appraising and how do we draw meaningful conclusions, insights and recommendations from our observations?

Understand Your Procurement Priorities

We have already hinted that choosing the “right” suppliers is not a binary question. The “choose two” nature of the project management triangle is a handy tool because it helps us to understand where our product or service is pitched in the market. That is to say, do we want fast and cheap, good and fast, or good and cheap?

We need to factor in our own business’s value proposition when evaluating that of suppliers. A fast food joint cannot risk running out of inventory. A fine dining restaurant will have no qualms about temporarily taking things off the menu, but cannot compromise on quality. A supplier might be “good” according to one customer’s requirements, but if there is a mismatch between what it provides and the specific needs of your business, you can face escalating costs, delays and even damaged reputation.

Once we understand our own priorities, then we can meaningfully approach the supplier appraisal process. Carter’s 10 Cs provide a useful framework for doing so.

Carter’s 10 Cs

Dr. Ray Carter is something of a guru in the field of supply chain management. He has developed a number of tools and models over the years, the best-known of which is the 10 C supplier evaluation model. 

Carter’s model, which he first published in 1995, is useful because it doesn’t just focus on the supplier but also examines its strengths, weaknesses and general practices in the context of your own needs and priorities as a potential customer: 

1) Competency

Let’s start with the fundamental question. How competent is the supplier? Does it have the skills and capability to deliver within expectations and needs? Who else is the supplier serving in the marketplace - how do their needs measure up against yours and are they satisfied? 

If customers have left them and gone elsewhere, try to find out why. You need to start your appraisal process with confidence that your suppliers are competent.

2) Capacity

If the first C was connected with quality, this one is all about quantity. Does the supplier have the capacity to handle your orders and get them delivered on time? Are there any factors that could impinge here, such as storage constraints, staff numbers, equipment availability or fluctuations in their own supply chain? Ask them what they would do if they had a sudden unexpected order equivalent to two weeks' needs?

3) Commitment

Any supplier can talk a good story as he walks a potential client around his factory or shows him a well-kept warehouse of inventory. But what evidence is there of a genuine commitment to delivering? Is the business externally accredited to ISO 9001 or a relevant industry standard? If not, does it at least have its own documented quality management processes? Also, is the supplier committed to you as a long term customer? If so, how is this manifested?

How can Kodiak Hub ensure Supplier Commitment?

Kodiak Hub helps our users to onboard supplier in 3-4 days rather than 3-4 weeks - First letting your supplier report in on any necessary compliance documentation you need on quality, capacity, commitment and much more. Which you can later easily check upon in the platform if your supplier is actually delivering on what they promised. Check out our post on 7 Steps to Automate Supplier Onboarding: From Manual to Magnificent

4) Control

How much control does the supplier have over its own supply chain? How does it go about meeting its commitments? This might be proven by a negative, that is, some horror story of what has happened when something went wrong. But often it is moments of adversity that bring out the best in us. Problems happen from time to time, and the best suppliers can meet them head-on while keeping any knock-on effects downstream to a minimum.

How can Kodiak Hub ensure control?

To help you out with this Kodiak Hub’s Media Monitoring scrapes the internet for mentions of your supplier, giving you the possibility to filter through adverse or positive media coverage. Our rating methodology also provides a 360º view of supplier performance to stay on top of deviations in supplier performance that could impact your core business. Read more on the 5 Benefits of Using Supplier Information Management Software.

5) Cash

There are too many examples out there of businesses that provided great products and had full order books, but went under because they ran out of cash. Don’t neglect the basics when appraising a supplier, and take a look at its financial health. Businesses with cash in the bank are better able to weather turbulent times, and that’s a particularly important consideration right now.

How can Kodiak Hub ensure there is cash in the bank?

Kodiak Hub has partnered with FinTech experts Modefinance to users financial ratings that are easy to understand, natively integrated in supplier scorecards. This removes the hassle of sifting through long and complex reports to understand the suppliers financial status.

Read more about how you can assess Supplier Financial Risk and optimize your Spend Management.

6) Cost

We’ve already established that cost might or might not be the crucial factor in supplier selection. But even if it is not the primary imperative, you still need to know that the cost is reasonable in the context of what is being delivered when compared with other options that are out there.

7) Consistency

It’s one thing a supplier promising the world in a 10-minute sales pitch. What evidence is there that this quality / price / speed will be consistently delivered over the days, weeks and months ahead? Look at their track record, check their reviews and ideally, get information from existing customers. This is the moment for the supplier to turn words into actions, so if you have not yet done so, request a demonstration or a sample.  

8) Culture

This aspect takes us back to that earlier comment about mismatches. If the overall ethos of a supplier is different to yours, the fit is not going to work. If your business is primarily focused on quality and price, it means you’re prepared to compromise on speed if necessary. If the supplier stands on the price and speed line, it means he’ll cut corners on quality if that’s what it takes to get the orders out on time. 

Clearly, there’s a mismatch and potentially, a disaster waiting to happen.

9) Clean

There are some areas in which every business needs to be aligned. Corporate social responsibility, equal opportunities and ethical business practices fall into this category. But the “clean” metric specifically considers sustainability. There is an expectation among all our customers that we must work to reduce our carbon footprint. What commitment has the supplier made to sustainability, and how can it demonstrate its adherence to these commitments?

How can Kodiak Hub ensure you’e working with clean suppliers?

Kodiak Hub’s solution makes it easy for you to gather sustainability data on your supplier, and if needed, via our collaboration function send out necessary corrective actions you want your supplier to take to meet your requirements. Check out Supplier Relationship Management: The Heart of Sustainable Sourcing

10) Communication

Good communication is a cornerstone of any business relationship. How does the supplier communicate with clients? Phone, Slack, in-app chat functionality, there are more ways now than ever.  How do their preferred communication channels align with yours? Also, what about out-of-hours contact? Few businesses have the luxury of working nine to five anymore, is there a way to get hold of someone in authority 24/7 should you need to do so? 

Read more about how an SRM system like Kodiak Hub can improve Supplier Collaboration & Communication.

Managing Supplier Information

Supplier appraisal is nothing new. Businesses have always “shopped around,” but in years gone by, the process had traditionally been ad-hoc, and conclusions were retained either in the head of the procurement manager or at best in a few notes in a supplier file in excel. 

Carter’s 10 Cs provide a way to formalize the process that leads to stronger supply chains and ultimately helps a business meet its core objectives. Kodiak Hub provides the tools to help you manage supplier appraisal effectively so that it is an ongoing process of continuous improvement and easy to monitor.

Explore how strong Supplier Information Management can provide the foundation for Procurement excellence. If you're interested in learning how Kodiak Hub's pioneering procurement platform can elevate your SRM journey, book a 1-1 meeting with our team here 👇🐻