Supplier Evaluation Matrix - Establishing Supplier Objectives And Motivate Improved Performance

Author(s):

Debra L. StubbingsDebra L. Stubbings, Managing Director, DLS Consulting Pty. Ltd, Sydney Australia, 61 2 47588 885, dstubbings@dls.com.au

84th Annual International Conference Proceedings - 1999 

ABSTRACT. Evaluation & measurement of Supplier's performance is an intricate part of a business relationship. However most companies only measure delivery, quality & price. This presentation will show the How, What, What & Who of Supplier Evaluation, across many aspects of a business relationship, putting into effect the "What gets measured, gets done" concept. It is an extremely important management tool for those using Strategic Alliances, Partnering or Supplier Development.

Supplier assessments provide an opportunity to view a Supplier's performance across many aspects. When applied to many Suppliers across several categories it will allow each rating to be compared to a best in Class Achievement. In this way you can actually create competition between Suppliers without having the Suppliers compete in the same industries or categories. Assessments or Evaluation Matrixes are used predominantly to establish a means to accurately assess Suppliers or Business partners and provide a framework for ongoing Supplier Development and effective Supplier Selection.

Matrixes are not intended to be used for all Suppliers, only those within your Supplier Development Program, however an organisation should measure Delivery and Quality performance for all Suppliers. The data is collated by the Purchasing department with input from Quality and Production regarding their specific areas. The Matrix can then be used to further improve the Business relationship across many broad areas, and becomes the driver for ongoing Cost reduction programs. A typical example of a Rating System.

There are four key areas in the Matrix:

Quality, Delivery, Price, Management

If this is the rating system your organisation chooses to utilise you must consider the ratings carefully. If you have stated that you will not do business with a Supplier who scores under 50, then you must be prepared to stand by that statement. Failure to act will re-enforce to non-performing Suppliers that you are not serious about performance targets and they will not improve. If however you demonstrate and make obvious to your entire Supply base that you will

stand by your convictions, then your performance targets will start to be met, and your business performance will improve dramatically.

QUALITY. A systematic approach for monitoring a Suppliers quality performance. Which creates a reliable database of information, which will assist in identifying trends and priority plans for quality improvement objectives. The components of the Quality segment are:-

Apply the weightings that best suit your Business requirements.

AREA WEIGHTING

Quality System (Internal performance)

Quality Performance (Internal performance)

Rejects (External performance)

Severity (External performance)

Non Conformance (External performance)

Other

DELIVERY. A systematic approach to monitoring a Suppliers Delivery performance. Which creates a reliable database for information, which will assist in identifying trends and priority plans for educational improvements. The components of the Delivery segment are:- Apply the weightings that best suit your Business requirements.

AREA WEIGHTING

Delivery Performance (External performance)

Lead time

Over supply

Other

COST. A system to objectively evaluate a Supplier's cost performance as it impacts on the business. To ensure optimum cost benefit and to monitor Supplier's price competitiveness.

The components of the Cost segment are: Apply the weightings that best suit your Business requirements.

AREA WEIGHTING

Cost reduction

Fixed price

CPI performance

Cost disclosure

Other

MANAGEMENT. A method of assessing the Supplier's internal performance and management's ability to communicate effectively within their own organisation. Their relationship with and commitment to Customers. To evaluate and rate the Supplier's long term commitment to your organisation, using the Suppliers Self Assessment Data. The components of the Management segment are:-

Apply the weightings that best suit your Business requirements.

AREA WEIGHTING

Management

Culture

Business Systems

SUPPLIER'S SELF ASSESSMENT. The self assessment is designed as a simple tool to identify important business activity to highlight professional organisations while at the same time indicate to the Supply base the types of things your organisation considers important to the long term successful operating of their business. The assessment is easily audited when Purchasing staff visit Supplier premises.

MANAGEMENT CRITERIA

ACTIVITY SCORE

Mission Statement* Exists and all employees aware -* Exists but not disseminated -* No Mission -

Score 4 Score 1 Score 0

Corporate Objectives & Business Plan* Clear well defined, 3 years +, supports mission statement, reviewed annually -* Plans with less than 3 years focus -* Defined but not followed, or not published. -

Score 6Score 3Score 0

Annual Activity* Strategies, action plans and targets established, monitored monthly - Score 10

* Strategies, actions and targets identified but not monitored -* Not clearly defined-

Score 5

Score 0

Reporting* Standard reports with structured review times, conforms to annual targets -* Reports generated are ad hoc and not standard-* No formal system -

Score 6

Score 3Score 0

Succession Plan* Key positions identified, development programs incorporated into individuals objectives -* Key positions identified, no development plans in individuals objectives -* No Plan -

Score 4

Score 2Score 0

MANAGEMENT TOTAL SCORE

CULTURE CRITERIAACTIVITY

SCORE

Communication* Important decisions and policy changes advised verbally to all employees within 48 hours* Decisions and policy advised in writing with little verbal communication* Notice board and rumor is main source of information

Score 4

Score 2

Score 0

Industrial Relations* Pro-active meetings between management and workforce to prevent industrial unrest* No lost time as a result of disputes* Industrial relations issues causing lost time

Score 8Score 4Score 0

Safety & Environment* Pro-active safety & environment programs. Policy and measures disseminated to all employees* Safety policy exists, but workers not responsible for their own areas* No policy or measures not published

Score 6

Score 3

Score 0

Employee Responsibility* Employees actively participating in continuous improvement, achievements

published * Some improvements being recorded, not all employees participating* No objectives. No or little participation from employees

Score 6

Score 3

Score 0

Shop floor reporting* Visual targets, standard reports, employees recording status* Some reporting in place, targets not clearly defined, reports not standardised* Reporting doesn't take place

Score 2

Score 1

Score 0

Employee Development & Training* Current skills matrix exists. Training programs available structured towards career development* Cross training occurs but no formal system exists* No cross training, No skills matrix exists

Score 4

Score 2

Score 0

CULTURE TOTAL SCORE

BUSINESS SYSTEMS CRITERIAACTIVITY

SCORE

Communication* Structured communication occurring at all levels and as needed with the customer, e.g. mgmnt-mgmnt, clerical-clerical, quality-quality etc.* Communication occurring regularly as needed but limited, e.g. mgmt - mgmt, clerical - clerical* Ad hoc communication usually customer's purchasing team to sales or order entry

Score 4

Score 2

Score 0

Customer Order Management* Streamlined transaction process, allowing for minimum processing errors and pro active feedback to sales on status* Process being streamlined, no proactive communication on order status* Traditional manual process in place, no improvement plans identified

Score 4

Score 2

Score 0

Customer Service* Working to silence is approval concept Customer always advised of issues or changes, OR order status never changed Score 6

* Order changes are usually advised prior to delivery* No pro active advise to customer on order status changes

Score 3

Score 0

Customer Complaints* Standard procedure in place to identify cause of all complaints for rectification and feedback to customer. Trend data recorded and analysed quarterly* Only key customers complaints routinely investigated, root cause highlighted for improvement* Analysis completed by management at customer request. Little to no follow up on findings

Score 2

Score 1

Score 0

Inventory Record Accuracy* >95% IRA. Cycle counting and inventory control techniques in place* 75-95% IRA. With cycle counting* Stocktaking is the only method of identifying IRA