What Are And How To Conduct Vendor Ratings?

Vendor ratings are an ongoing activity by companies and are a process of measuring the capabilities and performance of a vendor. These ratings are part of the company’s vendor management program. Vendor ratings are calculated from weighted variables, the most common being:

• The quality of the service: This would cover such factors as customer service, billing accuracy, quality of the service or products provided.
• Prices and cost of using the service: All companies require competitive pricing that remains fairly stable so that they can forecast their future costs.
• Adherence to delivery schedules: This includes promptness, quantity, lead time, packaging and the ability to provide ad hoc deliveries.
• Capability of the business: This includes problem resolution, technical support and overall service provided.

The final scores are compared and a final supplier ranking produced. Low ranking and performing suppliers can then be identified and the appropriate action taken.

This form of vendor ratings provide a process to review and rank a great number of vendors that they do or wish to undertake business with. There are a number of benefits that include:

• It provides a comprehensive feedback process that can be communicated to both staff and vendors.
• It is an effective method of controlling a business’s vendors.
• It is a good measure of vendor improvements or lack of performance.
• Good vendors often publish ratings that have been scored by major companies.

Large retail companies such as Amazon and eBay also provide facilities for consumers to mark each of their sellers and provide feedback for other potential purchasers to read. These ratings have become an important part of the host company’s business model and the comments are sought after by potential customers.

Gartner, Inc., the leading provider of research and analysis on the global information industry, holds a well documented vendor ratings process that is hotly followed by large companies looking to contract new suppliers and review their existing vendor base. Gartner publish their vendor ratings criteria and award one of the following ratings:

• Strong Positive: The vendor is considered a strong strategic choice.
• Positive: The vendor should be short listed.
• Promising: The vendor shows potential in specific areas.
• Caution: The vendor faces challenges in some areas.
• Strong Negative: The vendor faces difficulties in multiple areas.

Such is the cachet of Gartner’s findings that they are frequently proudly announced in the press.

 

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