Organisations are facing difficulties of scheduling the supplier appraisal process that leads to an approved suppliers’ listing.
Many organisations, in an effort to reduce risks of trading with bogus companies, have employed real time audits that involve supplier capability assessment, but unfortunately at the wrong stage, when suppliers are waiting for payments for services rendered.
Service delivery inevitably was declining owing to internal squabbles that included reversal of procurement decisions made by well-constituted procurement boards.
Auditors were visiting suppliers before payments were released to assess registration status and physical location of suppliers.
They seemed to be confusing supplier appraisal, supplier approval and supplier rating.
The purchasing and supply dictionary defines supplier appraisal or vendor evaluation as “assessment of potential suppliers’ capability of controlling quality, delivery, quantity, price and all other factors embodied in a contract”.
Supplier approval or supplier certification is “the placing of an enterprise on an approved list of suppliers following a process of supplier appraisal”. Supplier rating or vendor rating is “an index of the actual performance of the supplier”.
Supplier appraisal process is an essential aspect of both strategic sourcing and supplier management in order for an organisation to achieve competitive advantage.
Strategic sourcing is the location, evaluation and selection of suppliers capable of meeting the requirements of a particular category of purchase contributing to competitive advantage to the purchaser.
The appraisal process is guided by the following dimensions:
l Specification of the criteria against which suppliers will be evaluated against need to be known by the suppliers who chose to participate. This normally includes basic requirements such as documentation of a company in form of registration and other statutory compliance such as tax clearance, National Social Security Authority registration, supplier capacity, supplier credit worth, trade references, etc.
l Suppliers can be categorised according to the organisation’s material classes that could be based on the nature of products – raw material, spare part, consumable, etc; or by use; or by value; or whether strategic or non-strategic, etc.
The action to visit supplier at the payment stage clearly shows that most public institutions do not consider supplier appraisal seriously.
Serious businesses are advertising, inviting potential suppliers to bring proposals so that their capability could be assessed in order to make conclusions if they fit organisational requirements.
The process would not be complete without physical inspection of suppliers’ premises for categories that are regarded high value or strategic.
If this process is done correctly, they will be no need for the diligence service that is most likely to be a delinquency process if it is wrongly timed.
In public procurement, confusion maybe emanating from the mandatory State Procurement Board gazetting of public sector suppliers and Ministry of Finance vendor number application that some regard as complete supplier appraisal.
The two mandatory registrations are a mere listing; they are only limited to review of company registration documents. Public institutions are operating with a pool of incompletely assessed suppliers and this might be the motivation of the ill-timed and compensatory supplier evaluation regrettably at the expense of viability of suppliers.
The accurate modus operandi is for individual public institutions to undertake a supplier appraisal process, and the outcome will be an approved suppliers listing.
Purchase orders will only be issued to suppliers that are approved suppliers and not the fly-by-nights and briefcase businesses that end up milking the government.
Supplier appraisal is a pre-purchase activity that is equated to putting a fence at the top of the cliff instead of putting ambulances at the bottom to reduce loss of lives due to accidents.