What is Vendor Rating?

Approach to Vendor Rating

Maarten says: "Vendor Rating should be conducted periodically for a complete and objective picture. Many organisations choose to do a quarterly Vendor Rating among their employees, for example. This gives insight into the performance of a specific vendor and helps to adjust contract performance. You can then decide to end the collaboration or negotiate for better price-quality agreements."

Despite each organisation rating its suppliers on different performance factors, there is a roadmap you can follow to apply Vendor Rating in your organisation:

1. Determine which suppliers you will include in your Vendor Rating.

2. Determine on which performance you will rate suppliers

3. What results do you want to achieve with Vendor Rating?

''Vendor Rating must be carried out periodically to get the most complete and objective indication possible.''
Maarten de Ru, Director Partner & Alliances | ISPnext

Which suppliers am I going to include in my Vendor Rating? 

On average, an organisation soon works with 500 suppliers, making it impractical to assess them all. Therefore, select suppliers based on analysis. Interesting suppliers for a Vendor Rating include:

• Strategic suppliers: Suppliers of indispensable products with a high procurement risk, e.g. due to scarcity or politically unstable regions.

• A-suppliers: Suppliers accounting for a large percentage of procurement turnover, typically 20% of suppliers accounting for 80% of turnover.

Performance indicators for Vendor Rating

Maarten explains: "Start rating vendors on both quantitative and qualitative indicators. Quantitative data includes price agreements, delivery reliability and invoice-order matching; part of Spend Analytics in combination with Contract Management. In summary, this information gives a picture of the extent to which the supplier fulfils its agreements. While qualitative data is based on employees' experiences with the supplier in question. Use surveys to get a realistic picture of customer satisfaction and adjust procurement policy accordingly." Experience shows that employees are perfectly willing to participate in such a survey, for instance every quarter. This creates a realistic picture of customer satisfaction with the supplier in question. Purchasers adjust their purchasing policy and preferred suppliers based on the results from the surveys and employees benefit directly from this'.

Questions in the surveys can cover:

• Delivery time

• Quality

• Response time to questions

• Communication

• Invoicing

• Solution-oriented approach

Results of Vendor Rating

Vendor Rating offers several benefits such as: better communication and relationships with suppliers, and promoting a performance-oriented culture. The main goal is often cost savings, delivery reliability and better contract agreements. Vendor Rating is an essential process to monitor and improve supplier performance, ultimately contributing to the success of your organisation.