Suppliers are among the most critical joints in the supply chain cycle, which ensures continuity of production with the quality and time required. Several companies, therefore, assess the ability and efficiency of suppliers to supply the necessary materials and services before the contracting phase. Suppliers must cooperate with customers or their representatives if they are asked to prove that they are administratively, financially, and technically capable of reaching the customer’s confidence to the extent required to move forward with the contracting process. After the initial evaluation process, the customer will monitor the supplier’s improved performance and consider whether the level of risk in contracting and when it reaches an acceptable level.
The evaluation process can be exceptionally long and detailed, but failure to take this step will be costly to the customer and even the supplier financially and legally. These consequences will also particularly affect reputation, which is one of the most crucial factors that attract customers. In addition, if the supplier fails to comply with regulatory laws such as information confidentiality and labor security and safety, the company or organization will face profound consequences.
Find out what kind of supplier risks.
Before you start evaluating and examining the different components of the supplier company, you need to know what risks you are likely to face during the supplier contract period, which in turn will be part of your evaluation process.
· Strategic risk includes patents, legal consequences of contracting, or a sudden change in economic conditions.
· Financial risk: Is the supplier financially stable? Is its business consistently gradually profitable? Are its income and assets held more than its liabilities?
· Compliance risk: Does the supplier comply with the laws governing the country in which it operates? Such as information protection or environmental protection laws?
· Reputation risk: Will hiring a supplier undesirably affect your company’s reputation?
· Operational risk: Is there a possibility of damage as a result of the actions of the supplier’s staff?
· Environmental risk: Does the supplier impose any risks to the environment? Does he support manufacturing and selling products made from recycled materials? Does he sell products which may harm the environment when used or disposed of?
Priorities are set by the type of work the customer performs. For example, the medical sector client will be one of his priorities in protecting patient records.
Supplier Evaluation Process
ChainsBerg evaluates suppliers based on the following criteria:
1. Legal requirements and compliance
2. Quality standards certificates
3. Manufacturing and storage capabilities
4. Financial capacity and stability
5. Technological capabilities
6. Customer Service Standards
7. Delivery services
The following information will be taken into account in the supplier’s assessment.
· General target company information includes geographical location, tax number, operational capacity, establishment documents, and legal status.
· Historical financial information of the target company.
· Cash flow of the target company, including spending.
· Assess business risk and expected growth.
· Target company debt, emergency, and other liabilities.
· The company’s performance is targeted for operational and qualitative compliance, such as compliance with the procedures governing work and quality.
· Ensure that the supplier is committed to ethically regulated policies (conflicts of interest, financial corruption, bribery, sexual harassment, child abuse, employment, etc.
· Ensure the supplier’s profitability over the previous years, which guarantees the provider’s financial stability and its commitment to the work it offers.
· Ensure that the supplier is not involved in money laundering or is not on an international and domestic sanctions list by using a platform that provides the entire required information, including negative news in the media.
The evaluation process should be independent, impartial, and of high quality at all levels.
The supplier requires information and files so that ChainsBerg can perform its tasks in the audit or evaluation process to the greatest.
· Company registration files, including tax registration number.
· Ownership of the target company. Bills, for example.
· Financial statements: balance sheet, income statement, cash flow statement, etc.
· The company’s policies
· References to contracts made by the company over a specified period of time.
· Certificates of experience or completion of projects by former or current clients.
· Quality certificates such as ISO certifications
· Quality Management Program: The supplier should show how to manage the quality of products manufactured or purchased.
· The organogram of the company’s employees and the CVs of the principal or technical employees if the supplier is evaluated based on a particular project.