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Should Your Current Supplier Continue to be Your Supplier in the Future?

Tadipatri Sudarsan
Product Strategy Manager

Every business organization large or small will invariably source goods and services from one or more Suppliers to serve their own internal needs as well as those of their customers. Many organizations with multiple operational units have a need for a centralized purchasing function to improve their efficiency and to enforce tighter controls on spend. These centralized purchasing departments usually manage large procurement activities to source goods and services and most likely operate with clearly stated purchasing policies that are subject to periodic audits. The role of central purchasing groups is to operate as a bridge between Requesters, Users and Suppliers following an agreed-upon set of Procurement guidelines between the organization and the Supplier. At times, there may be conflicting objectives between the central purchasing function where best price conflicts with quick delivery so it is not easy to completely satisfy internal users or the various Suppliers providing those goods or service.

The onboarding process for Suppliers involves time and effort and once in the Supplier ecosystem, the nurturing of a good relationship is key.  Once Suppliers are part of your ecosystem, it is important a positive relationship and interaction occurs regularly between all the various stakeholders.  Between the internal users in the Warehouse, Finance department, Quality group, Manufacturing departments, Sales and even Executives, the Supplier’s interaction with your organizations are varied and constant. No Procurement executive can be aware of all these interactions, both positive and negative, so it is incumbent the organization have a way to measure the performance of their key Suppliers.  Retaining a good Supplier base is one of the key objectives for any centralized procurement department.  Can you quickly identify which of your long-term Suppliers handling a large percentage of your procurement business are actually performing adequately and with agreed service levels? Organizations wish to do business with the best Suppliers, especially when many of them may provide the same goods or services. Can you gauge who are your best Suppliers? Who performs consistently offering more than best pricing and delivery? How do you evaluate a Supplier for subjective criteria such as invoice accuracy and timely response to issues? To answer these questions organizations have started to develop Supplier Evaluation systems akin to Employee Appraisals. Over a period of time these Supplier Performance and Evaluation systems have evolved into a measure of both subjective and objective performance and gained acceptance from Buyers and Suppliers. Many Purchasing departments perform Supplier Performance Evaluations and use the scores resulting from this exercise to create remediation plans to encourage Supplier performance improvement. A result of continued low scores for the Evaluations might generate a need to search for alternate suppliers.

The Supplier Evaluation feature was not available in PeopleSoft Purchasing until the release of PeopleSoft Update Image #25. Until this functionality was released most organizations used a manual system operating outside the PeopleSoft Enterprise. This disconnected functionality did not then allow them to incorporate objective performance metrics using the analysis data already present in the PeopleSoft system. To address this gap and make the Supplier Performance Evaluation process more efficient and robust, PeopleSoft has delivered (free of charge with your Purchasing license), a feature we call Supplier Scorecarding. Supplier Scorecarding is designed to make the evaluation process more timely and consistent with the flexibility to have different evaluation criteria for Suppliers of Goods versus Services. The Supplier Scorecarding feature is very easy to understand and implement. It has a simple business flow,

The stakeholders within the organizations from different departments may form a standards committee and set the objectives and guidelines to evaluate the Suppliers. Based these standards, templates are defined and Evaluations are then rolled out to key individuals who interact with those Suppliers where they then supply their subjective opinions to a series of questions.  Evaluation Templates are flexible to allow the stakeholders to define relevant questions under various sections for feedback solicited from various groups of one or more internal users.

The system will automatically notify the users that an Evaluation is awaiting their attention. The Evaluator opens the Evaluation for the Supplier and the form will guide them through the questions needing their attention.  The participant enters their rankings and comments to the various Section Questions. Once all the feedback is received the calculated scores may be published for the review by of all the stakeholders. The system can also analyze performance metric data residing within the Enterprise and includes those as objective metrics as part of the overall total score combined with the feedback provided by the Evaluators. Multiple out-of-the-box Analytics are provided with the capability to slice and dice information as desired by the viewer.  Based on these Analytic reports the Scorecard owners could draw up a Performance course correction plan, if necessary, for each Supplier falling under a desired performance threshold. The beauty of having an Evaluation Template is that it can be re-used for similar Suppliers of the same goods or services so comparisons between Suppliers are on an equal level. Also, a benefit of the Evaluation Template is that it can be used to do periodic evaluations of the same Supplier to gauge improvements or degradation of service levels over a period of time.

Whatever system or method currently employed for evaluating a Supplier, we are confident it can be configured into the Supplier Scorecarding feature with an easy implementation. To see the Supplier Scorecarding module in action, please watch this Video Feature Overview

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