The evaluation and selection of external suppliers is a key phase in the procurement planning process.
In some markets, there are so many suppliers available to an organization that choosing the right one is difficult, while in others the market may still be immature and the available suppliers need to be checked very carefully.
The requirements relating to the evaluation, selection and monitoring of suppliers are expressed in section 8.4.1 paragraph 3 of ISO 9001:2015 and can be summarized as follows:
- need for an evaluation, selection, and periodic re-evaluation of external suppliers even in the preliminary phases of the business relationship;
- presence of a process that provides for the activities of evaluation, pre-qualification, and qualification of suppliers;
- presence of constant monitoring of external suppliers, including the verification of products and services provided;
- need to retain evidence of the evaluation, selection, and monitoring of suppliers.
Going into the merits of the requirements, what exactly does it mean to evaluate, select, and periodically re-evaluate external suppliers? When you start searching for an external supplier, you need to be sure that they can provide the product or service you require. This means that the decision to select a specific external supplier should be based on knowledge of that supplier's ability to meet the organization's needs.
The decision, in fact, should be based on data collected as a result of an evaluation carried out according to the criteria that had been previously established for the selection of a supplier for a specific material or service. Why is it necessary to comply with this requirement? Because it would be foolish to select an external supplier without first verifying that they can meet the needs of the company that is hiring them to provide a product, a processing, a material, or something else.
Failure to check the supplier's skill and the quality of what they sell, in fact, could result in the late delivery of a product because the materials supplied were wrong or because the supply of the service provided was not optimal. The process of selecting external suppliers varies depending on the nature of the products and services to be procured. The more complex the product or service, the more complex the selection process will be.
You can choose to purchase products and services based on your own (customized) specifications or those of the supplier, depending on what you are buying. There are, then, gray areas in which proprietary products or services can be customized according to your needs and the customized products and services mainly consist of proprietary products or services configured according to the needs of the client company.
There is no generic model to follow with regard to the selection process: each sector has developed a specific process to meet its needs. However, we can treat each of these processes in several phases in each of which the number of potential suppliers is reduced to end with the selection of what is hopefully the most suitable range of suppliers to meet the requirements.
Some suppliers have a good design capacity but lack the ability to produce in a certain quantity; others have a good capacity in the field of research but are not so good in development. It is necessary to develop an assessment and selection process and in some cases, this may involve several procedures closely related to the use that is intended to be made of what will be purchased.
The purpose of the preliminary assessment of the supplier is to select a supplier in line with the needs of the organization, not necessarily to select a supplier for a specific purchase. A process is needed to collect information on potential suppliers and to eliminate those that are not suitable, so that - at the time of purchase - the entire process does not have to be followed from scratch.
The first step is to establish the type of products and services you need to support your business and, therefore, look for suppliers who declare that they provide such products and services. At this stage, it is necessary to look at what each supplier declares to do and how they declare to work and what they have done in the past.
Some of the checks necessary to establish the credibility of suppliers would waste a lot of time and delay the selection process if they were carried out only when you have a specific purchase in mind. It will, therefore, be necessary to develop your own criteria to proceed preliminarily to a sort of screening. Among these criteria there could be the following:
- the supplier is likely to be able to provide what the company wants in the quantities that it may require;
- the supplier is likely to be able to meet your potential needs regarding delivery dates;
- it seems that the supplier can provide the after-sales support that you usually need;
- the supplier has a precise ethic for what concerns speeches such as the use of child labor or the production and sale of counterfeit goods;
- the supplier respects the health and safety standards of its sector;
- the supplier complies with environmental regulations in the matter;
- the supplier has a system to ensure the quality of its products or services;
- the supplier seems committed to continuous improvement;
- the supplier is financially stable.
The evaluation of the supplier must, therefore, be divided into several parts:
- the technical evaluation - to establish that products, processes or services are actually what the supplier claims they are;
- the evaluation of the quality management system - to establish whether the supplier can demonstrate the ability to consistently provide products and services that meet the requirements of the organization;
- the financial evaluation - to verify solvency, insurance risk, stability, etc.;
- the ethical evaluation - to verify probity, compliance with professional standards, laws and requirements.
These assessments do not necessarily have to be carried out at the supplier's premises. Much of the necessary data can be collected through a questionnaire and by conducting targeted research. To avoid mistakes, you can also choose to rely on assessments carried out by accredited third parties.