Why should you do an on-site assessment of your suppliers?

There are several benefits of doing on site supplier assessments:

· To drive continuous improvements

· To uncover hidden risks, waste and cost in the supply chain

· To better understand who you do business with – are they who they say they are? Do they do what they say they do?

· Better understand the risks and opportunities in your business relationship

You can design an assessment model to fit your company’s size, industry and needs and here are some examples of what areas it can include:

1. Overall Company performance: how is the supplier overall performing based on a few industry generic measurements?

2. Company Financial: how well is the supplier performing financially? Do we see any financial risks to do business with this supplier?

3. Risk management: what risks does the supplier see and what actions and plans are there for countermeasures?

4. Environmental: does the supplier follow legal environmental requirements? Are there processes and quality systems in place?

5. CSR: Is the company committed to OECD’S or UN Global Compact Guidelines and how are they followed up?

6. Cooperate Strategy: how does the supplier’s strategy look like and how well is it implemented and followed up?

7. Development capabilities: if you require any development work done by the supplier, how capable are they to perform what you need? What development processes and tools do they use?

8. Supplier Management: how does the supplier manage their supplier base and follow up legal requirements with their suppliers?

9. Production capabilities: How capable and experienced is the supplier to produce your goods to meet your requirements (e.g: performance, quality, cost, etc). What management systems and certifications does the supplier have and use?

Above areas should be expanded with several other questions and checkpoints to follow up your suppliers and can be different from different industries and commodities.

Common pitfalls

- Companies only do “desk top” assessment of the suppliers and don’t visit them on site. The “Go and see” mentality is very important to understand risks and opportunities with whom you do business

- Companies don’t have sufficient knowledge about CSR and environmental requirements meaning you risk ending up with a supplier who potentially could have child labor

- Companies do an on-site assessment but never follow up with an action list to close gaps and drive continuous improvements

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