Question

Which of the following key supplier evaluation criteria is the most critical and why?

1 Management capability,

2 Employee capabilities,

3. Cost structure,

4. Total quality performance, systems, and philosophy,

5. Process and technological capability,

6. Sustainability and environmental compliance,

7. Financial stability,

8. Scheduling and control systems,

9. E-commerce capability,

10. Supplier’s sourcing strategies, policies, and techniques and

11. Longer-term relationship potential.

Answer 1

7. Financial stability is the key supplier evaluation criteria that is the most critical because it affects the supplier's ability to serve the customer directly. Credit statement review plays an important role in financial evaluation. Credit Report contains information on the financial status of the supplier. Credit report contains information about the potential supplier's experience, management, and facilities. A similar alternative practice is an independent analysis of the financial statement of the supplier. The purchasing officer can obtain information on the financial stability, pricing policies, and overall operating efficiency of the supplier by applying the ratio analysis tools to the balance sheet and income statements of the supplier.

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