What Is a Vendor Evaluation?
Supplier risk assessment refers to an enterprise's judgment of the comprehensive level of the management system and the avoidance of supplier selection risks through the analysis of the supplier's products and the diagnosis of the corporate process.
Supplier risk assessment
- The steps for supplier risk assessment and management are as follows. [1]
- 1. Principles of setting up the evaluation system [2]
- To ensure the scientific and reasonable evaluation results, the following principles should be followed when establishing a risk indicator system:
- l) Scientific principles. The design of the evaluation index system should include a certain number and level of indicators, and the relationship between the indicators should accurately reflect the interconnection between things, which is the premise and basis for achieving correct and scientific evaluation.
- 2) The principle of completeness. The evaluation index system must comprehensively and accurately reflect all aspects related to enterprise risk, which can not only reflect the historical performance and current status of the enterprise, but also reflect the company's cooperation ability and future development potential.
- 3) Conciseness principle. On the basis of comprehensively reflecting the comprehensive level of the enterprise, the evaluation index system must also be concise and clear. The index system is too large, too detailed, and too many levels, which will not only increase the cost of data collection and the complexity of the operation process, but also inevitably focus the company's attention on small issues, which is not conducive to the overall evaluation of the company.
- 4) The principle of comparability. The evaluation index system should reflect the common attributes of all evaluation objects, and use quantifiable indicators as much as possible. For qualitative indicators, reasonable quantified data can be given through expert scores or other methods to ensure comparable evaluation results Sex.
- 5) The principle of flexibility. The evaluation index system should have sufficient flexibility and operability so that the enterprise can flexibly use it according to its own characteristics and the actual situation of its production and operation.
- 6) The principle of scalability. The evaluation index system should have certain expansibility, which can not only reflect the current development level of the enterprise, but also can be continuously expanded and extended with the development of the enterprise.
- 2. Supplier risk assessment indicator system
- Dickson G.W.'s research on supplier evaluation indicators in foreign countries is earlier and has a greater impact. Through the analysis and research of 170 survey results, he finally identified 23 supplier selection criteria and found three important ones. Selection criteria: history of product quality, cost, and delivery behavior; Hatheran, after investigating the pharmaceutical industry, summarized eight criteria for evaluating and selecting suppliers. Among the top three are quality, price, and service. . Yahya and Kingaman used the analytic hierarchy process to establish an evaluation criteria system for the selection of suppliers, of which delivery, quality, and facilities accounted for a large proportion.
- In China, according to the survey statistics of the CIMS-SCM (Modern Integrated Manufacturing System-Supply Chain Management) research group of the School of Management of Huazhong University of Science and Technology, it is known that when Chinese companies choose suppliers, the main criterion is product quality, followed by price The other is delivery lead time. Lin Yong and Ma Shihua divided the evaluation indicators that affect the choice of partners into four categories: corporate performance, business structure and production capacity, quality system and corporate environment. On the basis of summarizing the existing research results and consulting relevant experts' experience, according to the principle of setting up a risk assessment system, an indicator system as shown in Table 3 was established. Suppliers are evaluated from five aspects: business environment, corporate qualifications, service levels, cooperation compatibility, and supply.
- Table 3 Supplier risk assessment index system
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- 1) External risk factors
- It is mainly an assessment of the business environment of the enterprise. This indicator includes the political and legal environment, social and cultural environment, economic and technological environment, and natural geographical environment.
- Political legal environment and socio-cultural environment: It is mainly considered when selecting suppliers in different countries or regions. Political and legal factors are related to the security of the investment environment. They are mainly examined from the aspects of political stability, government's preferential policies to enterprises, and the improvement of the legal system; social culture affects corporate behavior and decision-making invisibly. From the aspects of population quality, religious system, social customs and the exclusion of foreign economy.
- Natural geographical environment: It mainly examines the geographical location, climate, natural resources, and transportation, and especially considers the transportation distance and transportation time between the supplier's location and the enterprise. Distance and time directly affect transportation costs, inventory, and order mobility.
- Economic and technological environment: The economic development level of a country or region restricts the development of suppliers themselves, mainly from the aspects of market openness and perfection, corporate competition, infrastructure construction, technological development level, and economic development prospects.
- 2) Internal risk factors
- The assessment is mainly made from two aspects: corporate qualifications and service levels. Enterprise qualifications mainly include human resources, financial status, production equipment, research and development capabilities, management level, intangible assets, corporate reputation and environmental protection level. Service levels are mainly described in terms of rapid response capabilities, service satisfaction, and the smoothness of information communication.
- Human resources: It is mainly considered in terms of the overall quality of personnel (educational composition), the proportion of technical developers, training time of personnel, and training costs.
- Financial status: There are many factors that reflect the financial status of the company. The focus is whether there is sufficient funds to carry out production, whether it has sufficient profitability and operating safety, etc. consider.
- Production equipment: It mainly considers the advanced level and utilization degree of supplier's production equipment and technology.
- R & D capabilities: Suppliers' R & D capabilities are the driving force behind innovation in the supply chain.
- Product development cycle and success rate, sales of new products, and the number of invention patent applications.
- Management level: mainly from the perspective of the supplier's quality management level, cost control level and inventory control level. The quality management level mainly examines the operation of the quality assurance system; the cost control aspect examines the effectiveness of costs according to the input-output principle; the inventory control level mainly considers the inventory turnover rate.
- Intangible assets: mainly examining the trademark value, goodwill, and technical secrets of suppliers.
- Corporate credibility: The credibility of an enterprise is a big issue for its long-term development. Including contract execution rate, cooperation history, external satisfaction, corporate ethics level, credit for repayment, etc.
- Environmental protection level: Investigate the impact on the environment during the manufacture, use and recycling of suppliers' products.
- Quick response capability: The basic premise is accuracy, which is mainly considered in terms of rapid decision-making capabilities, information integration levels, contingency capabilities, overall collaboration levels, and the ability to meet individual needs.
- Service Satisfaction: Investigate the supplier's service attitude, service content and standards, service response time, and after-sales service quality.
- Information communication smoothness: Good communication is the prerequisite for successful cooperation, which can be described in terms of information communication and communication capabilities, information release status, information sharing level, information feedback capabilities, and information processing.
- 3) Associated risk factors
- Consider from the two indicators of cooperation compatibility and availability. Because it is a deep and multi-faceted long-term cooperation with suppliers, it is necessary to consider the evaluation of the supplier's cooperation ability. Cooperation compatibility includes corporate culture compatibility, organizational management compatibility, corporate strategic compatibility, information system compatibility, and product standardization. The supply situation is mainly examined from the product qualification rate, product price, procurement cost, time flexibility, quantity flexibility, and product flexibility.
- Compatibility of corporate culture: Corporate culture is a general term for values and behavior codes that are generally recognized and commonly followed by all employees in long-term production and operation activities. Corporate culture is an invisible constraint. Only similar cultures can conduct good communication and cooperation.
- Organizational management compatibility: Organizational management is the process of establishing organizational structure, specifying positions or positions, and clarifying the relationship of responsibilities and powers so that members of the organization can work together and work together to effectively achieve organizational goals. It mainly considers the compatibility of organizational structure and management system.
- Compatibility of strategic objectives: The strategic objectives of an enterprise determine the development direction of the enterprise, and it is the guiding principle of enterprise production management activities. Synchronizing with the strategic goals of the supplier is conducive to the coordinated development of the supply chain. If strategic goals conflict, actions taken will be inconsistent, frictions will continue to emerge, and cooperative relationships will continue to deteriorate, eventually breaking.
- Information system compatibility: Information cooperation and exchange is the key to a win-win situation. The compatibility of an information system is related to the speed and accuracy of information transmission. Specifically, it refers to the compatibility of information content, carrier form, transmission channels, storage media, and processing methods.
- Degree of product standardization: Consider product compatibility from the degree of product standardization. Product standardization refers to the process of uniformly stipulating the types, performance, specifications, quality, process equipment, raw materials, and inspection methods of products / parts, forming various standards, and implementing them.
- Product qualification rate: mainly from the perspective of product quality. Product quality is the foundation of an enterprise's survival, and product value is based on product quality. Product qualification rate refers to the degree to which the supplier's product quality meets the needs of the enterprise.
- Product price: It refers to the cost to purchase each unit of product. The price of a product provided by a supplier can reflect whether the price is competitive among products in the same industry. Product price is no longer the primary factor to consider when selecting a supplier, but it is still an important factor.
- Purchasing cost: It refers to the various expenses paid by the enterprise during the procurement process, including transportation costs of materials, loading and unloading costs, packaging costs, insurance costs, etc. Good cooperation can save procurement costs.
- Time flexibility, quantity flexibility, and variety flexibility: It mainly considers the ability of suppliers to change the time, quantity, and variety of products, and the ability to meet delivery time, quantity, and variety requirements. Flexibility reflects a company's ability to respond to changes in market and customer needs.