Introduction To Vendor

Introduction To Vendor Evaluation
Introduction
As a consumer, when you want to purchase an item, whether it is a new car or a flat screen
television, you will most likely do some research on the prices of your local stores or from
vendors on the internet. When you have narrowed your search you then look at other criteria
that may be important to you, like warranty or availability. Lastly you will look at other less
tangible criteria such as your previous experiences with the vendor and how their customer
service was. This behavior is exactly the same for companies when they want to evaluate the
vendors in their supply chain.
Unless your company only uses one vendor for each item they purchase, there will enviably be
occasion when a decision has to be made as to which vendor gets your business. There are a
number of different scenarios when this will occur, for example when the item is purchased for
the first time and when an item is no longer single sourced.
Purchasing An Item For The First Time
When a decision has to be made between vendors, the purchasing department will use some
vendor evaluation method to be their tool in the decision. If the item is to be bought for the
first time, the purchasing department may have contacted a number of vendors and sent them
a Request for Quotation (RFQ). Each vendor would then complete the RDQ with the
information that was required, normally price and terms. The purchasing department would
then use these completed quotations, in conjunction with other information they have
collected on the vendors, to make short list for further evaluation or make a final selection.
The purchasing department would evaluate the vendors based on a number of criteria they
had decided upon which may include objective criteria such as price and warranty and
subjective data which would include past experience with the vendor. Based on the weighting
given to these criteria the purchasing department would be able to fairly evaluate each
vendor.
Choosing Between Vendors
If the sourcing of an item has been from a single vendor but another vendor has been
approved to supply the same item, a decision would need to be made on vendor selection
when a requisition has been received by the purchasing department. Many companies use a
vendor evaluation tool that allows transaction data to be analyzed to give a comparison
between vendors. The vendor evaluation uses criteria that have been determined by the
purchasing department to compare vendors such as price, delivery reliability, delivery date
adherence and quality of the item. There are any numbers of criteria that can be used in a
comparison and these are usually weighted so that important criteria are given more
credence. For example, a company may decide that quality of the items it receives from
vendors is more important than price, which in turn is more important that delivery reliability.
The company would then weight these criteria so that the overall score reflects that
requirement.
Conclusion
Vendor evaluation is important as it can reduce supply chain costs and improve the quality
and timeliness of the delivery of items to your company. The skill in evaluating vendors is to
determine which criteria are important and the weighting that these criteria are given. It is
important to remember that these criteria may be different for each item you are sourcing and
possibly different between regions or countries. Objective data is useful to compare the
information that you can obtain from each purchase order and goods receipt, but sometimes
the subjective data that your purchasing agents can provide such as customer service and the
willingness of the vendor to accommodate your requirements, is as or more important in a
vendor evaluation.
Vendor Evaluation (For Retail, Consumer Goods & Logistics companies)

There may be a justified view today that technology is moving at a pace much faster
than the ability of businesses to catch up with it. While technology has always been
spoken about as an ‘enabler’ to the business, it is also true that technology is
‘deciding’ new business models today. While a classic retailer’s magic mantra is
location, location and location, Jeff Bezos of Amazon swears by technology,
technology and technology.
A diametrically opposite example is that of RFID, that utopian answer for supply chain
bliss. How much has RFID really changed lives of businesses? Or is it still just a great
coffee-room or conference-room discussion topic?
Businesses are often challenged in their ability to distill realism from marketing
rhetoric of their vendors. This challenge assumes great significance especially when
these discussions are part of a wider transformation initiative for the business.
RDS Consulting can help manage the Vendor selection process through a streamlined
decision making journey, that includes
 Request for Proposal (RFP) creation: Identification of business goals,
Process definitions, and Requirements analysis that covers Functional,
Technological and Infrastructural needs. Also cover Build v/s Buy decisions.
 Vendor Shortlisting : RFI based evaluation of vendors and filter out to a
shortlist of typically 2 or 3 vendors eligible to respond to the RFP
 Vendor Selection : Scoring the RFP responses, combining product
functionality with technical architecture and other considerations
(Infrastructure needs, Service locations etc).
 Vendor Contracting : Specifying objectives, deliverables, timeframes clearly.
Fixed v/s Variable cost mechanisms. Negotiations based on product pricing,
services and payment terms.

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Introduction To Vendor Evaluation

Purchasing An Item For The First Time

Choosing Between Vendors

Vendor Evaluation (For Retail, Consumer Goods & Logistics companies)

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