What Is a Vendor Evaluation?

Malcolm Tatum

Sometimes known as a vendor analysis, a vendor evaluation is an approach used by businesses to determine if a given provider or supplier is a good candidate for an ongoing working relationship. The idea behind the evaluation is to make sure the vendor is financially stable, able to provide the quantity of goods or services required, and is capable of providing a level of service and support that is considered acceptable. The pricing offered by the supplier is often a key component in the vendor assessment.

The exact criteria involved in a vendor evaluation varies based on the needs of the business.
The exact criteria involved in a vendor evaluation varies based on the needs of the business.

While the exact criteria involved in the vendor evaluation will vary based on the needs of the business, there are several basic factors that are highly likely to come under consideration. Some of these factors will focus on general information about the vendor that helps to tell the potential client more about the provider’s operation. Questions regarding the number of locations operated by the vendor, a general idea of how large the employee workforce actually is, and the annual revenue of the supplier help to establish that the vendor is established and has managed to build a presence within the business community.

Along with the basics, the vendor evaluation will look a little deeper in the policies and procedures of the supplier. Here, the goal is to determine if the vendor is capable of supplying goods or services at volume levels that will meet the needs of the client. For example, a large corporation seeking a teleconference vendor may inquire about the number of connections that can be made into a single conference call, and if the company has the capacity to handle a large influx of teleconferences by the company at specific times of the business week. In like manner, a textile manufacturer may want to make sure the vendor can supply a certain amount of raw materials by a certain day each week without fail.

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The vendor evaluation will also often include some attention to the ability of the supplier to respond effectively in the event of a sudden increase in the need for goods and services. Discussions of how much time the vendor would need to make arrangements to meet emergency situations, and how requests for those needs can be expedited, are often important to potential customers. In like manner, questions about customer service support, either as a matter of course or in an emergency situation, are also often part of the evaluation.

As with many types of business assessments, price is also an important consideration in any vendor evaluation. The potential customer will want to know that the vendor is not only capable of meeting needs but will also provide those goods and services at a competitive price. Assuming that the products, level of service and support, and pricing are all attractive enough to continue discussions, the customer may be willing to entertain a proposal from the vendor and eventually choose to enter into a contract that benefits both parties.

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