Evaluating Potential Suppliers
How can you be sure that your suppliers will meet your standards?
Have you ever established a relationship with a supplier, only to realize, later, that you'd made the wrong choice?
For example, you may have found a supplier that offered a good price, but later realized that its quality standards were low, or that its communication was unacceptably poor.
Mismatches between your needs and a supplier's offerings can add costs, cause delays, and even damage your organization's reputation – for example, if the equipment or resources supplied are substandard.
The "10 Cs of Supplier Evaluation" help you avoid problems like these. This checklist helps you to set out your organization's needs, understand how suppliers can meet them, and identify the right supplier for you.
You can adapt the 10 Cs checklist to outline your organization's needs in a tendering process. Use each of the elements to state the standards that you want your bidders to meet.
Ray Carter, director of DPSS Consultants, first outlined his Seven Cs of Supplier Evaluation in a 1995 article in "Purchasing and Supply Management." He later added three new Cs to the model.
The 10 Cs are:
Used as a checklist, the 10 Cs model can help you evaluate potential suppliers in several ways.
First, you can use it to analyze different aspects of a supplier's business: examining all 10 elements of the checklist will give you a broad understanding of the supplier's effectiveness and ability to deliver.
The checklist can also help you negotiate a lower price with a supplier.
For example, you're unlikely to find one that excels in all 10 areas; however, one might be strong in some areas and weak in others. You can use this insight to bargain for a lower price, especially if you perceive that the supplier's weaknesses pose a risk for your firm, and if you need to take action to minimize this risk.
If you have only a few suppliers to vet, you might quickly eliminate all of them, if you want them to excel in all 10 Cs.
To avoid this, use a tool such as Grid Analysis to choose the supplier who best satisfies the conditions that are important to you. However, also double-check the areas where the supplier is weak – some of these may make a relationship impossible.
Let's look at how you can apply the 10 Cs to find the supplier that will best fit your organization's needs and values.
When asking questions of either the supplier or its customers, be ready to ask probing questions – ones that will reveal the level of detail that you need to make an informed decision.
For business-critical resources, for situations where you will be spending a lot of money, or where you want a long-term relationship with a supplier, it's worth putting a lot of effort into supplier evaluation.
First, look at how competent this supplier is. Make a thorough assessment of the supplier's capabilities measured against your needs, but then also look at what other customers think. How happy are they with the supplier? Have they encountered any problems? And why have former customers changed supplier?
Look for customers whose needs and values are similar to yours, to ensure that the information you gather is relevant to your organization.
The supplier needs to have enough capacity to handle your firm's requirements. So, how quickly will it be able to respond to these, and to other market and supply fluctuations?
Look at all of the supplier's resources, too. Does it have the resources to meet your needs, particularly when commitments to other clients are considered? (These resources include staff, equipment, storage, and available materials.)
Your supplier needs to provide evidence that it's committed to high quality standards. Where appropriate, look for quality initiatives within the organization, such as ISO 9001 and Six Sigma.
The supplier also needs to show that it is committed to you, as a customer, for the duration of the time that you expect to work together. (This is particularly important if you're planning a long-term relationship with the supplier.)
You'll need evidence of its ongoing commitment to delivering to your requirements, whatever the needs of its other customers.
Query how much control this supplier has over its policies, processes, procedures, and supply chain.
How will it ensure that it delivers consistently and reliably, particularly if it relies on scarce resources, and particularly if these are controlled by another organization?
Your supplier should be in good financial health. Cash-positive firms are in a much better position to weather the ups and downs of an uncertain economy.
So, does this supplier have plenty of cash at hand, or is it overextended financially? And what information can the supplier offer to demonstrate its ongoing financial strength?
Look at the cost of the product that this supplier provides. How does this compare with the other firms that you're considering?
Most people consider cost to be a key factor when choosing a supplier. However, cost is in the middle of the 10 Cs list for a reason: other factors, such as a commitment to quality and financial health, can potentially affect your business much more than cost alone, particularly if you will be relying on the supplier on an ongoing basis.
How will this supplier ensure that it consistently provides high quality goods or services?
No one can be perfect all of the time. However, the supplier should have processes or procedures in place to ensure consistency. Ask this supplier about its approach, and get a demonstration and a test product, if possible.
The best business relationships are based on closely matching workplace values. This is why looking at the supplier's business culture is important. For example, what if your organization's most important value is quality, and your main supplier cares more about meeting deadlines? This mismatch could mean that it's willing to cut corners in a way that could prove to be unacceptable to you.
Use the Cultural Web as a guide to organizational culture.
This refers to this supplier's commitment to sustainability, and its adherence to environmental laws and best practices. What is it doing to lighten its environmental footprint? Ask to see evidence of any green accolades or credentials that it's earned.
Also, does this supplier treat its people – and the people around it – well; and does it have a reputation for doing business ethically?
Query how the supplier plans to keep in touch with you. Will its proposed communication approaches align with your preferred methods? And who will be your contact person at this firm?
It's also important to find out how the supplier will handle communications in the event of a crisis. How quickly will it notify you if there's a supply disruption? How will that communication take place? And will you be able to reach senior people, if you need to?
Ensure that all of the information generated by your research – especially queries aimed directly at the supplier – is in writing. This will mean that information is "on the record," and that you can locate it easily in case of a problem.
Ray Carter first developed his Seven Cs of Supplier Evaluation in 1995. He later added three more Cs.
The 10 Cs are:
You can use this model to evaluate the competency and viability of potential suppliers. This, in turn, can help you choose the firm that best meets your needs, and that aligns with your organization's values.
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