A vendor is a faction in the supply chain that makes goods and services accessible to organizations or consumers. The phrase “vendor” is habitually used to explain the entity that is paid for goods and services. Normally, vendor evaluation is crucial as it can reduce supply chain costs and enhances the quality and timeliness of the delivery of items to your organization. The ultimate objective is to ensure a low-risk, best-in-class vendor, and supplier portfolio.
Vendor assessment is an evaluation and authorization process that organizations can use to ascertain if potential vendors and suppliers can meet up their organizational standards and commitments once under the agreement. Vendor evaluations constitute the following major key points:
- Record business requirements and vendor requirements,
- Initial examination of all vendor applications or proposals,
- Allocate importance value for each requirement,
- Allocate a performance Value for each requirement,
- Compute a total performance score,
- Choose the best vendor from the scoring list.
Vendors are usually assessed in the areas of pricing, quality, delivery, risk, and service. The overall process aims at empowering an organization to take suitable measures for controlling cost, reducing potential risks related to vendors, ensuring excellent service deliverability, and deriving value from vendors in the long run.
After going through the above points one can say that the vendor evaluation process is one of the most critical activities or processes in the organizations. The major advantages of having a vendor evaluation process in an organization are:
- Competitive pricing: Receiving requests for quotations (RFQ) from various vendors helps the organization in getting competitive pricing which results in reducing the overall cost of the product or service.
- Improves product quality: Organisations obtain the right to choose the best quality of product or services from the list of vendors.
- Improves delivery time: Vendors are selected based on various key points and one of the important points is to deliver the material or service as per the timelines. Hence, it can be said that having a vendor evaluation process helps in saving delivery time of receiving material or service.
- Safeguard from fraud vendors: While evaluating vendor profiles companies thoroughly checks the background history of the vendor. Their financials, product quality, and deliverables are checked before selecting the final vendor. It helps the company in dealing with fraud or sham vendors.
In today’s modern era having the best vendor evaluation process is key to the success of the organizations and a lot of time is devoted by management to improving this process.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.
Posted by: CA Aman Aggarwal
AKGVG & Associates