Irrespective of the functional area, organizations of all sizes should develop a robust supplier evaluation process. It will improve efficiency in the supply chain and yield maximum value from suppliers. Below are the key benefits of an effective supplier evaluation program.
- Performance Evaluation – The Supplier Evaluation process helps the business owners to get insights into the supplier’s past performance.
- Control Risks – The supplier evaluation process helps to understand the overlapping risks between the buyer and seller. Shared information through supplier evaluation will reduce these risks through appropriate procedures and controls.
- Eliminate Unnecessary Costs – Understanding supplier’s practices and processes through supplier evaluation will help to reduce the monetary and time costs. These costs may involve costs associated with additional inspection, extra freight charges, obsolete inventory, etc.
- Collaborate with Suppliers – Companies can provide a third-party perspective to the supplier through the supplier evaluation process. It will lead to better collaboration with the supplier and provide benefits like cost reduction, better delivery times, etc.
- Leverage Supplier Base – By measuring supplier performance, an enterprise can set a threshold for its supplier that can lead to higher-quality results. With supplier evaluation, companies can better plan new products and services based on a good understanding of their suppliers’ capabilities and performance levels.
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