Vendor Rating

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Description of Vendor Rating. Explanation.

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Definition Vendor Rating. Description.

Vendor Rating is a system used by buying organizations or industry analysts to record, analyze, rank and report the performance of a supplier in terms of a range of predefined criteria, which may include such things as:

Quality of the product or service
Delivery performance and reliability
Cost, price
Capabilities
Service
Financial continuity of the firm

The method includes defining the criteria and the weight each criterion receives in the overall result, development of the questions and questionnaires, actually carrying out the measurements, and finally interpreting the results. If vendor ratings are carried out periodically or even ongoing, the results (per vendor) can be analyzed and compared over time.

Benefits of Vendor Rating

Clear and objective overview of performance of suppliers
Enables better vendor management
Incidents and escalations can be monitored earlier
Suppliers are stimulated to improve their performance
In the case of periodical vendor rating: analyze trends in vendor performance

If vendor rating is carried out before the placement of an order, it is also known as Supplier Evaluation. When undertaken after order fulfillment, it is also referred to as Supplier Rating.

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Recent User Comments

    			 
             Christopher Odida - Kenya
  	       
  		     Objective Vendor Evaluation and Appraisal
  	  		 "Whenever vendor evaluation has been  done by any organization, the results should be captured in key performance indicators within a specified period of time. Without this, a lot of subjectivity will still find its way into the whole process."
  			   
    	  		 0

    			 
             Sahir - Malaysia
  	       
  		     Vendor Rating must be Fair
  	  		 "Vendor rating needs a system which is fair between vendors. We should ask ourself what is the priority? Price or performance? It is difficult to get the lowest price with the best performance/quality."
  			   
    	  		 3

    			 
             Kalyana Sundaram - India
  	       
  		     Disadvantages of Vendor Rating; Where it is Difficult to Use
  	  		 "When limited sourcing is available, the use of the vendor rating is counter productive."
  			   
    	  		 3

    			 
             summia irum - Pakistan
  	       
  		     Vendor Rating Definition
  	  		 "It is formal supplier evaluation system. It is the motivation for manufacturers and services firms to ensure that the desired feature of service or product is built in or not. It is c`an be the direct result of implementation of just-in-time concept."
  			   
    	  		 0

    			 
             K B Rao - India
  	       
  		     Vendor Rating Usages
  	  		 "Any organization who carries out any activities to meet customer requirements expects information on his performance. Vendor rating meets this with respect to the supplier performance. Supplier improvement can be measured and monitored and rewarded on the basis of the supplier rating on a continual scale. Deleting a supplier from the approved supplier list can also be done on the basis of supplier rating. Supplier is always aware of his performance on various criteria and weightages."
  			   
    	  		 0

Best User Comments

    			   
                 Luigi Visiello - Italy
  	         
  				   Vendor Rating for New, Potential Vendor
  				   "I'd like to understand how should one can create a first vendor rating procedure for new suppliers (not yet present into the supplier list). It should be useful to use not only financial KPI (debtness ratio, turnover, cash to cash cycle, etc..), but also operational ones. Could someone give me an idea?

Thanks all for sharing comments"
    			   
        	  		 7

    			   
    			     Pete - USA
  	         
  				   Objective or Subjective Vendor Rating Criteria
  				   "Note that vendor ratings can be both objective (lead times, costs, number of service calls), but also subjective (opinions, experiences, perceptions about suppliers)."
    			   
        	  		 4

    			   
                 Jeswan SinghPS - Malaysia
  	         
  				   Vendor Rating needs Benchmark
  				   "Vendor ratings are important but they are only practical if a benchmark is available. The availability of the benchmark itself can make a marked difference in the output quality of vendors. Also of equal critical importance is co-ordinated vendor development programmes that ensure that product quality output is not only maintained but excelled."
    			   
        	  		 3

    			   
    			     Sankar - India
  	         
  				   Vendor Rating, Vendor Assessment and Vendor Evaluation
  				   "What is the difference between vendor rating, vendor assessment and vendor evaluation? Or are they all the same?"
    			   
        	  		 3

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Compare with: Kraljic Model | Vendor Managed Inventory | IC Rating | Credit Rating | Behaviorally Anchored Rating | Corporate Governance Rating

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End of description Vendor Rating. An explanation.

Copyright 2010 12manage - The Executive Fast Track. V10.5 - Last updated: 22-3-2010. All names tm by their owners.

	└► Jo Van Kerkhove (BE)	Vendor rating	"Isn't the performance already fixed by the quality standards we wish our vendors to folllow? If they all deliver according specifications, the performance should be ok."
	└► Ewe Beng Teoh (Malaysia)	Fair Vendor Rating	"Vendor rating has to be conducted with fairness and purpose. The process of vendor rating must be reviewed regularly for maintaining the effectiveness all the time."
	└► Lee (China)	Vendor Rating	"I agree with you. Vendor rating should be executed according to your requirement that has been agreed to by the vendors."

	└► Armin Gruening (Australia)	Limited number of vendors	"Agreed - or if not counterproductive, at least of very limited benefit"
	└► Amarnath (India)	Vendor Rating	"Agreed, but do the vendor rating for breaking monopoly and try to develop a new vendor if possible."

	└► Jay Deragon (USA)	VRM	"Doc Searls is running a project at Harvard called VRM (Vendor Relationship Management) which addresses all of the above and a lot more. You can view is ongoing efforts here blogs.law.harvard.edu/vrm/ I suggest we all support his vision and make it a reality. VRM will transform how markets behave and disrupt old business models."
	└► Madan Gopal Agarwal (India)	Supplier Evaluation, Rating a Potential Vendor: ISO 9001	"A generic system for any Sector is ISO 9001 (Specific for Auto is ISO / TS 16949). - Identify Critical Parameters - Create Questionnaire on Business Strategy / Plan / Growth Perspective, Financial Capability and Soundness, Technical Competence, Managerial strength etc. of the Supplier - Define weightings for each & Minimum Qualifying marks - Discuss with Supplier - Rate the Supplier - Calculate the overall rating and compare with minimum marks. In case of gap, discuss with Supplier, work out an improvement plan along with Time-frame and responsibilities. Re-audit at agreed time and continue the process till result is realised. This can be one of the ways."
	└► Ismail Kashkash (Saudi Arabia)	Vendor Rating Based on Unique Criteria and KPIs	"Additional to standard vendor evaluation and selection procedures, each organization should have a selection criteria unique to its processes and evaluation KPIs for each vendor. Your business results should drive these criteria and KPIs."
	└► VISWANATHAN (India)	Vendor rating	"Vendor rating has come a long way in Indian industries. BHEL uses one of the best vendor rating methods and continuously upgrades it. In my opinion, if vendor rating has to succeed the procurers have to continuously feed the vendors about their performance giving them enough scope to know about their performance and at the same time making them understand where and how they can improve."
	└► Vinod Duhoon (India)	Vendor Rating	"Among other things, vendor rating includes the timely delivery, and quality in terms of PPM, Lead Time for Delivery."
	└► Colin Downey (New Zealand)	Vendor Rating - New	"I have use parameters such as Suppliers Distribution (Wide/Narrow), Infield sales support, Marketing and Promotional support, Delivery in full on time to review into the Maintenance, Repair & Operational industry. You must identify what it is you are wanting, i.e. the end result, before starting any review so using a scaling grid may also be useful."
	└► Ankit Agrawal (india)	Important about vendor rating	"Now a days vendors are not only the business parties but they are the business partners and very important process owner. So to keep overall process smooth and error free regular vendor evaluation is needed. there are 5 main factors which are need to be evaluated, they are- 1. Price offered by the vendor 2. Quality offered by the vendor 3. agility of the vendor 4. Error rate of the vendor and 5. further capability of the vendor On these basis vendors are given rates and from the aggregate score vendor with highest score is prefered and praised."
	└► Susana Amezcua Rodriguez (Mexico)	Supplier evaluation	"Excellent information for me as a quality consultant"
	└► Arne Antos (USA)	Vendor Rating	"I think it boils down to did you get value for what you paid. That would include timely shipment and condition of item upon receipt."
	└► Christopher Odida (Kenya)	Objective Vendor Rating in Developing World	"Yes this can be achieved but a lot professionalism will be very vital, otherwise vendors who are good in canvassing might be the beneficiary of the whole exercise."
	└► Bernadette (Kenya)	Vendor Rating in Developing Countries	"Vendor rating is not common in the most developing countries because the process is entangled by bid rigging and collusive behaviour. Most vendors are related in one way or another and they will offer the same service. If poor it will all be poor service."

	└► Ashok A Kella (India)	Vendor Rating - Objective and Subjective	"Pete comments that rating can be both objective as well subjective. I would like to contribute that objective rating does find its drive from subjective. Thus the two are interdependent rather than two different aspects of measuring."
	└► Sajee Sirikrai (Thailand)	Vendor Rating is Rational Tool	"Vendor rating is a tool for rational buyers. I hope business use it in a proper way. For example some criteria, especially ones relating to previous business/person relationship, should not deliberately go out of sight."

	└► Z (Netherlands)	Vendor Assessment and vendor evaluation	"I think they're all the same, but the informating on this page is (unfortunatly) quite limited. I think the general idea is to have a model to help determine what the best supplier is for your business. There are different systems for this, though i can't find at this moment..."
	└► Ram (India)	Vendor Rating	"Vendor assessment and vendor evaluation are usually done for the sake of selection of supplier wherein vendor rating is done after the supplies to measure his potential in keeping up supply schedules, quality, etc."
	└► R.S.Mathur (India)	Vendor Rating	"I agree with Ram. Vendor rating is a perpetual process of objectively evaluating the suitability of the vendors based on their actual performance in terms of critical measures like price, quality and delivery for each transaction. Rating allows vendors to be ranked."
	└► Ismail Kashkash (Saudi Arabia)	Vendor Rating, Vendor Assessment and Vendor Evaluation	"Rating, assessment, and evaluation are 3 processes used to measure performance and deliverables of new vendor and/or current vendor. However, there is a profound difference between each process: - Vendor Rating is usually used with reference to a scale - Vendor Assessment is usually a one time process and usually for a specific measure. - Vendor Evaluation is a continuous process of measurement, usually comprehensive."
	└► Pradeep Deo (India)	Vendor Rating, Assessment and Evaluation	"Vendor rating is carried out after the completion of contract, while vendor assessment and vendor evaluation are done before awarding the contract. To this extent, these are different things."
	└► Emmanuel Guobadia (Nigeria)	Vendor Rating , Assesment and Evaluation	"Vendor rating is an approach of comparing various vendors in terms of quality, price, delivery etc using scale of worst to best. Vendor assesment is is the critical analysis of the content & service delivery of a particular vendor to make sure it meets client demand. Vendor evaluation is the process of analysing the service already rendered by the vendor to determine if it actually meets up with the requirement of the clients. Rating, assesment and evaluation are all intertwined with very slight difference, thanks."