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How does MM Vendor Evaluation support procurement?

Within the SAP Materials Management system, the Vendor Evaluation component can help evaluate which vendors are performing well -- and which ones are not.

Vendor Evaluation is an integrated component within Materials Management that can be used to optimize procurement....

The Vendor Evaluation component uses a company-defined scoring system that measures how a vendor's performance stacks up either on procurement or quality fronts -- or both. It can help procurement planners decide if the company should offer high-scoring vendors more favorable payment terms or quality inspection processes -- for example, skipping some of the quality inspection steps to save time, efforts and cost. On the other hand, vendors that are performing at a subpar level can be identified, as well. Vendor Evaluation is set and maintained at the purchasing-organization level, where procurement and purchasing responsibility resides.

While procurement and quality are two benchmarks, or criteria, for vendor evaluation, it is possible to further divide them to ensure balanced reflection of various factors or subcriteria that affect vendor evaluation:

Procurement

  • Price. Vendors offering the most competitive price score high.
  • On-time delivery. Meeting on-time delivery schedule or within predefined delivery tolerances ensure high scores.
  • Shipping instructions. Adhering to the company's predefined shipping instructions gives such vendors higher scores.

Quality

  • Quality score from goods receipt inspection. The quality inspection process entails recording results and defects of materials received from vendors, followed by making the decision to use the material or not. This quality inspector's decision is known as usage decision (UD), which consists of not only a UD code, but also has an associated predefined quality score. For example, a UD code "A" represents "Accepted," with a quality score of 100, while a UD code "A1" represents partially accepted, and has a quality score of 70. A lower-quality score leads to a more unfavorable assessment of a vendor.
  • Quality notifications as complaints. The number of vendor complaints received in the form of quality notifications reflects the rejection level of vendor-supplied material.
  • Audit management. Companies conduct quality audits of vendors and record results of important findings, such as the cleanliness of the premises or adherence to safety procedures. The average quality score from audits is taken into consideration during Vendor Evaluation.

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This was last published in April 2016

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