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Establishing an Effective Vendor Evaluation Framework: Dos and Don’ts

Jul 24, 2020

Enterprises today choose to outsource a huge chunk of their core operations to third-party vendors. To make the most of these investments, businesses must evaluate vendors against a well-defined set of vendor evaluation criteria.

As the name suggests, vendor performance evaluation is a basic process of evaluating new and old vendors using a quantifiable approach. It holds a top spot in the agenda of every business irrespective of its sector since businesses have a huge portfolio of suppliers, and it’s essential to gauge their performance based on factors like contract compliance, cost reduction, and risk management. Moreover, as businesses expand their global footprint, vendors are handled by an increasingly large number of purchasing executives. In such a scenario, the lack of a vendor performance evaluation framework may intensify the challenge of fostering relationships with the right vendors, leading to huge losses.

In addition, the COVID-19 pandemic has shed light on the need to evaluate vendors’ ability to deliver the services and products you need to maintain critical operations under emergency conditions. Hence, while establishing a framework or while creating a vendor evaluation scorecard businesses must include factors that help gauge a vendor’s disaster and pandemic preparedness.


Building strong vendor-business partnerships depends on having a reliable vendor evaluation process in place to identify and gauge the potential of vendors. We can help you build such processes and track events in real-timerequest a FREE proposal to know more about our capabilities.


To make vendor evaluation a cakewalk for our clients, we have developed easy to follow steps to create and establish a vendor evaluation framework. Adopting this vendor performance evaluation framework can help you compare the capabilities of different vendors to determine the best fit.

1. Maintain a Healthy Vendor Roster

Vendor categorization is the first step in developing an effective vendor evaluation system. Categorizing vendors into homogenous groups based on their offerings can help distinguish vendors based on the products and services offered.

2. Analyze Offerings Based on the Needs

The most crucial step in vendor performance evaluation is to understand what you can expect from a particular vendor. Once you’re fully aware of the capabilities of the vendors, you can identify the vendor that best meets your enterprise’s needs.

3. Evaluate the Vendor’s Risk Profile

The third most crucial step in vendor performance evaluation revolves around evaluating the vendor’s risk management ability. Since data security plays a pivotal role in all vendor relationships, it’s crucial to conduct periodic reviews, onsite visits, and audits on a regular basis. Doing so can help you evaluate the vendor’s performance against your company’s goals.

4. Communicate with your In-House Teams

To maximize success, its crucial to streamline processes. Since internal teams will be working with the vendors when the need arises, its crucial to communicate with your executives regularly regarding the importance of the relationship and how they can help support your efforts.

5. Set Vendor Evaluation Benchmarks

Businesses must establish vendor performance evaluation benchmarks while working with third-party vendors. Setting thresholds can also help you track and evaluate the performance of your vendors on an ongoing basis. Whether you decide to perform this evaluation on a monthly, quarterly, or annual basis, you need to perform your analysis based on previously established goals.

6. Establish an Active Feedback Loop

By establishing a feedback loop, businesses can continually monitor and take necessary steps to improve vendor performance regularly. To obtain the best results, companies must begin by generating performance requirements and then set up multiple options for feedback.

Using a vendor selection scorecard or a vendor rating system for your vendor roster is crucial and helps discern vendors based on the abilities. Request a FREE demo to know how we help businesses in establishing a robust vendor evaluation process.

What Are the Don’ts in the Vendor Evaluation Process?

Vaguely Formulated Requirements

Unclear requirements leave room for interpretation. As such, vendor responses will be based on assumptions, which will further aggravate your challenges in evaluating vendor responses.

Communication Indiscretion

Whether a deliberate attempt to provoke conflict or not, giving out information about a competitor’s pricing strategy to another vendor can jeopardize the whole process and severely harm your credibility in the long-run.

Disregarding the Proof of Concept

A common mistake is to gauge a vendor’s capability solely on the proposal and not their ability to meet your business requirements. Hence, analyzing the proof of concept must hold a top spot in your vendor evaluation checklist.

Boost effectiveness and profits by building powerful, automated vendor performance evaluation systems. Speak to an expert for detailed insights.

Based on the criteria mentioned above, it is quite evident that setting standards for vendor evaluation can benefit both your organization and the vendors by helping build stronger business-vendor relationships. However, businesses must keep abreast of the current market trends and monitor the vendor landscape periodically to find new vendors that comply with guidelines and meet specific requirements.

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