Vendor performance is usually evaluated in the areas of pricing, quality, delivery, and service. Each area has a number of factors that some firms deem critical to successful vendor performance.
Pricing factors includes
- Competitive pricing – The prices paid should be comparable to those of vendors providing similar product and services. Quote requests should compare favourably to other vendors.
- Price stability – Prices should be reasonably stable over time.
- Price accuracy – There should be a low number of variances from purchase-order prices on invoiced received.
- Advance notice of price changes – The vendor should provide adequate advance notice of price changes.
- Sensitive to costs – The vendor should demonstrate respect for the customer firm’s bottom line and show an understanding of its needs. Possible cost savings could be suggested. The vendor should also exhibit knowledge of the market and share this insight with the buying firm.
- Billing – Are vendor invoices are accurate? The average length of time to receive credit memos should be reasonable. Estimates should not vary significantly from the final invoice. Effective vendor bills are timely and easy to read and understand.
Quality factors includes
- Compliance with purchase order – The vendor should comply with terms and conditions as stated in the purchase order. Does the vendor show an understanding of the customer firm’s expectations?
- Conformity to specifications – The product or service must conform to the specifications identified in the request for proposal and purchase order. Does the product perform as expected?
- Reliability – Is the rate of product failure within reasonable limits?
- Reliability of repairs – Is all repair and rework acceptable?
- Durability – Is the time until replacement is necessary reasonable?
- Support – Is quality support available from the vendor? Immediate response to and resolution of the problem is desirable.
- Warranty – The length and provisions of warranty protection offered should be reasonable. Are warranty problems resolved in a timely manner?
- State-of-the-art product/service – Does the vendor offer products and services that are consistent with the industry state-of-the-art? The vendor should consistently refresh product life by adding enhancements. It should also work with the buying firm in new product development.
Delivery factors includes
- Time – Does the vendor deliver products and services on time; is the actual receipt date on or close to the promised date? Does the promised date correspond to the vendor’s published lead times? Also, are requests for information, proposals, and quotes swiftly answered?
- Quantity – Does the vendor deliver the correct items or services in the contracted quantity?
- Lead time – Is the average time for delivery comparable to that of other vendors for similar products and services?
- Packaging – Packaging should be sturdy, suitable, properly marked, and undamaged. Pallets should be the proper size with no overhang.
- Documentation – Does the vendor furnish proper documents (packing slips, invoices, technical manual, etc.) with correct material codes and proper purchase order numbers?
- Emergency delivery – Does the vendor demonstrate extra effort to meet requirements when an emergency delivery is requested?
Service factors to consider
- Good vendor representatives have sincere desire to serve – Vendor reps display courteous and professional approach, and handle complaints effectively. The vendor should also provide up-to-date catalogues, price information, and technical information. Does the vendor act as the buying firm’s advocate within the supplying firm?
- Inside sales – Inside sales should display knowledge of buying firms needs. It should also be helpful with customer inquiries involving order confirmation, shipping schedules, shipping discrepancies, and invoice errors.
- Technical support – Does the vendor provide technical support for maintenance, repair, and installation situations? Does it provide technical instructions, documentation, general information? Are support personnel courteous, professional, and knowledgeable? The vendor should provide training on the effective use of its products or services.
- Emergency support – Does the vendor provide emergency support for repair or replacement of a failed product.
- Problem resolution – The vendor should respond in a timely manner to resolve problems. An excellent vendor provides follow-up on status of problem correction.