Vendor Rating (also called: supplier 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
- 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
Objective and Subjective Vendor Rating
Broadly 2 types of supplier rating can be distinguished:
- Objective vendor rating (based on lead times, costs, number of service calls, etc.)
- Subjective vendor rating (based on opinions, experiences and perceptions about suppliers)
Supplier Rating, Assessment, Evaluation and Ranking
These terms are all closely related and similar, but:
- Vendor Evaluation
- Is a process carried out after the product is delivered or the service is rendered.
- Can indicate a continuous process of measurement, usually comprehensive.
- Vendor Rating
- Can be used before or after order fulfillment.
- Is usually used with reference to a scale.
- Is an approach of comparing various or multiple vendors.
- Vendor Assessment
- Usually indicates a one-time process.
- Typically used for one particular vendor.
- Vendor Ranking is the end result of the above processes.