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Vendor Evaluation
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SAP AG
R
Vendor Evaluation
© SAP AG TAMM30 4.0B 34-1
SAP AG
R
At the end of this unit, you will
Vendor Evaluation: Unit Objectives
be familiar with the levels of vendorevaluation and the different evaluationcriteria
be able to differentiate between and makeuse of the various options for maintainingvendor evaluations
understand the process of evaluation withrespect to certain automatic subcriteria
be acquainted with the analyses availablefor the purposes of vendor evaluation
© SAP AG TAMM30 4.0B 34-2
SAP AG
R
Vendor Evaluation: Business Scenario
You wish to use the vendor evaluationfunctionality to provide yourself withcomprehensive information for yournegotiations with vendors. To do so, youmust define in Customizing the criteriaaccording to which evaluation is to takeplace and how which aspects of yourvendors’ performance are to be rated. Youmust also carry out an evaluation of yourvendors at regular intervals, in order tokeep the data up to date.
© SAP AG TAMM30 4.0B 34-3
SAP AG
R
Function of Vendor Evaluation
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Vendor evaluation: general
Vendor B
Vendor A
Vendor C
ServiceServiceDelivDeliv..QualQual..PricePriceOverallOverall
Evaluation for material 1
ServiceServiceDelivDeliv..QualQual..PricePriceOverallOverall
The vendor evaluation functionality supports you in optimizing the procurement process. It facilitates the process of source selection and the ongoing surveillance of existing supply relationships. You can quickly spot any difficulties that may arise during the procurement of materials and services.
In the R/3 System, the Vendor Evaluation component is fully integrated into the MM Purchasing module within Materials Management. This means, for example, that data such as delivery dates, prices and quantities deriving from purchase orders is used.
Vendor Evaluation uses data from the Quality Management module (such as the results of incoming inspections or quality audits).
Vendor Evaluation accesses basic Materials Management data, Inventory Management data (such as goods receipts), and data from the Logistics Information System (LIS).
© SAP AG TAMM30 4.0B 34-4
SAP AG
R
Scoring Levels in Vendor Evaluation
Weighted
Weighted
Overall score
Scores formain criteria
Scores forsubcriteria
Individual scores
To be able to assess a certain vendor's performance in comparison with others', you need to define a scoring range. The vendor evaluation system offers you a three-level scoring system from 1 to 100 points, allowing you to carry out a comparative appraisal of your vendors.
The overall score gives you a general idea of the performance of your vendors, allowing you to compare them at a glance. The overall score is arrived at from the scores a vendor was awarded for all main criteria. The scores for main criteria reflect a vendor's performance more accurately than the overall score.
The main criteria are: "Price", "Quality", "Delivery", "General Service/Support", and "External Service Provision" (for the evaluation of external service providers). If required, you can also define other or further criteria.
You can divide each main criterion into several subcriteria. The latter are the smallest units within vendor evaluation for which scores are calculated.
The scores achieved by a vendor for the individual criteria may be of varying significance to you. The weighting factor takes account of this.
The organizational level at which vendors are evaluated is the level of the purchasing organization. Each purchasing organization evaluates the vendors assigned to it.
© SAP AG TAMM30 4.0B 34-5
SAP AG
R
Semi-automaticsubcriterion
Types of SubcriterionOverall score
Scores for maincriteria
Scores forsubcriteriaManual
subcriterionAutomatic
subcriterion
Pc. % Conditions
$
Pc. % Conditions
$Individual scores
Subcriteria are differentiated according to the methods by which the scores for them are determined. They can thus be subdivided into manual, semi-automatic, and automatic criteria.
In the case of manual subcriteria, you enter a blanket score for the subcriterion in evaluation of a vendor. The system takes account of this score in calculating the higher-level main criterion.
Instead of awarding a vendor a blanket score for all his materials, with the semi-automatic subcriteria you maintain a number of scores at info record level for all materials that are of importance to you. The average value of these scores is included as the score for the subcriterion in the score for the higher-level main criterion.
In the case of automatic subcriteria, the rating can be determined from data that arises through normal online activities in the system. This data enters the vendor evaluation system via statistical files (e.g. through the process of automatic updating).
The automatic subcriteria that are predefined in the standard system suffice for the evaluation of a vendor from whom you procure materials (that is to say, you need not necessarily maintain scores for manual or semi-automatic subcriteria in order to carry out evaluations).
© SAP AG TAMM30 4.0B 34-6
SAP AG
R
Automatic Subcriteria: Overview
Main criteria
Price
Quality
Delivery
Service
SubcriteriaSubcriteria
Price levelPrice historyGR inspectionRejection/complaintsAuditOn-time deliveryQuantity reliabilityShipping instructionsConfirmations
You use the subcriterion “price level” to evaluate the relationship of a vendor’s price to the market price.
You use the subcriterion “price history” to evaluate changes in a vendor’s price over time in comparison with the market price.
You use the subcriterion “GR inspection” (“incoming inspection”) to evaluate the quality of the materials supplied by a vendor. The quality inspection takes place at the time of goods receipt.
You use the subcriterion “rejection/complaints” to evaluate whether and/or how frequently the materials supplied by a vendor are found to be faulty after having successfully passed through incoming inspection (e.g. during the production process, on the shopfloor), resulting in additional expense and loss of time due to reworking, fault rectification, preparation of rejection reports, return/replacement of parts, etc.
You use the subcriterion “audit” to evaluate the effectiveness of the quality assurance system an enterprise employs in the manufacture of its products.
You use the subcriterion “on-time delivery performance” to evaluate how well a vendor adheres to prescribed delivery dates.
You use the subcriterion “quantity reliability” to evaluate the extent to which a vendor delivers the exact quantities ordered.
You use the subcriterion “compliance with shipping instructions” to evaluate how exactly a vendor complies with the instructions you issued regarding the shipping or packing of a material.
You use the subcriterion “confirmation” to evaluate the degree to which a vendor adheres to the delivery dates set out in confirmations (such as shipping notifications) that he has previously sent to you.
© SAP AG TAMM30 4.0B 34-7
SAP AG
R
Vendor Evaluation: Maintenance
Purch. organization 1000
Weighting keysWeighting keys
Vendor evaluation
record
Semi-automatic
criteria
Manualcriteria
Auto-matic
criteria
Vendor A
Calculationlog
You can use the Maintain Vendor Evaluation function to maintain all subcriteria (including the manual subcriteria).
You must first assign weighting keys to any vendors that have not yet been evaluated. The weighting key is a code under which the weighting shares for a group of main criteria are combined and stored. The system can calculate the overall score on the basis of the weighting key and the scores for the main criteria.
The calculation of the scores for the automatic subcriteria is recorded in a log.
The name of the person responsible and the date of evaluation are recorded in the vendor evaluation.
Changes are listed in the change documentation.
You can record the evaluation the system has arrived at for a vendor in an evaluation sheet and print the latter out. The evaluation sheet header shows the name of the person who created the sheet, the date it was created, and the name of the vendor. Below this are the overall evaluation and the scores for the individual main criteria. The scores for the subcriteria belonging to each main criterion are listed under the heading "Detailed evaluation".
© SAP AG TAMM30 4.0B 34-8
SAP AG
R
Automatic Re-Evaluation
Purch. organization 1000
Weighting keysWeighting keys
Oldvalues
Newvalues
. . .
. . . . . .. . .
AutomaticAutomaticcriteriacriteria
Semi-Semi-automaticautomatic
criteriacriteria
Vendor A
Save
Vendor evaluation
record
Calculationlog
The Automatic re-evaluation function enables you to update the scores for the automatic and semi-automatic subcriteria for a vendor.
If a vendor has never previously been evaluated, you must first specify a weighting key.
The manually maintained scores of the last evaluation remain unchanged, so that the results are comparable.
You are provided with a comparison of the old and newly computed points scores for all automatic and semi-automatic subcriteria. If you wish, you can replace the old scores by the new ones.
The calculation is recorded in a log.
You can display the evaluation using the SAP Hierarchy or Presentation Graphics function to obtain a better overview. The graphical display offers the advantage of enabling you to see at a glance how scores are developing over time.
© SAP AG TAMM30 4.0B 34-9
SAP AG
R
Evaluation in the Background
WeightingWeightingkeykey
WeightingWeightingkeykey
WeightingWeightingkeykey
AutomaticAutomaticcriteriacriteria
Vendor A Vendor NEW Vendor CVendor B
Vendor evaluation
record
Calculation log
You can have your vendors regularly evaluated in the background. The Evaluation in the Background function is available for this purpose.
If you wish to initiate a background processing request for vendor evaluation, you need a variant. The latter defines the number interval of vendors to be evaluated, for example.
You can either update existing evaluation records, or have new records created for not-yet-evaluated vendors.
When creating new evaluation records, you can either assign all new records the same weighting key or have these records created without weighting keys. You must manually reprocess evaluation records without weighting keys after their creation. You can find relevant records by running the Vendors without weighting keys analysis. From the analyisis, you can branch directly to vendor evaluation maintenance.
© SAP AG TAMM30 4.0B 34-10
SAP AG
R
Quantity ReliabilityPur. order GR Del. sched.
Sch. line 1GR
Points score
Smoothing
Calculate% variance
“Del. compl.”ind. X
No quantity reliability update !
Vendor evaluation
CustomizingCustomizingsettings for settings for purchasing purchasing organizationorganization
Goods receipt
Goods receipt
100 pc. 90 pc.100 pc.
100 pc.
You use the subcriterion “Quantity reliability” to evaluate the extent to which the quantities a vendor has sent you match up with the quantities specified in your purchase orders.
Before a vendor’s quantity reliability can be determined, the PO item in question must be closed.
The system determines the difference between the GR and PO quantities and converts this difference into a percentage variance.
The points score determined is updated in a statistics record after application of a smoothing formula and then included in the vendor evaluation. The smoothing formula is defined in Customizing.
Over- and underdelivery tolerances are not taken into account in the vendor evaluation.
There is no evaluation of quantity reliability with respect to scheduling agreements.
Reversals of goods receipts are not taken into account in vendor evaluation.
© SAP AG TAMM30 4.0B 34-11
SAP AG
R
On-Time Delivery PerformancePur. order
100 pcs.Statistics-rel. delivery date
Minimum quantitycheckEnd
GR10 pcs.
Pur. order
100 pcs.Statistics-rel. delivery date
GR100 pcs.
Points score
Smoothing
Calculate% variance
Vendor evaluation
CustomizingCustomizingsettings for settings for purchasing purchasing organizationorganization
Goodsreceipt
Goodsreceipt
12.20 12.20 12.20 12.19
You use the subcriterion “On-time delivery performance” to evaluate a vendor’s adherence to delivery dates.
At the time of a goods receipt against a purchase order, the system checks whether the specified delivery date (statistics-relevant delivery date) has been adhered to or whether delivery was made early or late.
If the delivery date was not adhered to, the system can convert the absolute delivery date variance into a percentage variance using the Customizing parameter Standardizing value for delivery time variance and evaluate the latter. If you assign a low standardizing value, a large percentage variance results for relatively small date variances in days. If you specify a higher standardizing value, the percentage variance will be relatively low. The points value thus determined is updated in a statistics record after application of a smoothing formula and included in the vendor evaluation.
If a goods receipt covers several lines of a delivery schedule, this calculation is carried out for each schedule line.
If the delivery date was adhered to, the system checks whether you have maintained any system settings for the Customizing parameter Minimum delivery percentage and, if so, which.
If you have not maintained a minimum delivery percentage, receipts of fractions of the PO quantity are also taken into account in the computation of the score for on-time delivery performance.
If you have maintained a minimum delivery percentage and the minimum quantity was not reached, the system does not determine an on-time delivery performance score for the goods receipt in question.
© SAP AG TAMM30 4.0B 34-12
SAP AG
R
Price Level
Calculate% variance
Points score
Vendor evaluation
CustomizingCustomizingsettings for settings for purchasing purchasing organizationorganization
Comparisonprice
Market priceAverage priceSingle/solesourcing
<>=?
Info record
Vendor AMaterial 1Effective price
Pc. % Conditions
$
Pc. % Conditions
$
You use the subcriterion “price level” to evaluate how a vendor’s price for a material compares with the prices of other vendors or with an average price.
All materials for which the vendor’s conditions have been maintained (e.g. in info records) are examined.
To determine a vendor’s price level, the system compares the vendor’s valid effective price with the market price for each material or the average price derived from all info records for the material and determines the percentage variance.
If a material is procured from one vendor only, the Customizing parameter Single/sole vendor determines whether or not this exceptional situation is taken into consideration in the vendor evaluation. If you have set this indicator, the system assumes that effective price of the vendor to be evaluated is the market price when calculating the score for the price level. This means that the market price and the effective price are identical. There is a variance of zero percent and the vendor is awarded a good score. If you do not set the indicator, the single or sole vendor situation is not taken into account (that is to say, the system does not determine a score for the price level in respect of this material).
The system computes the average score from the sum of the individual scores determined. This average represents the score for the subcriterion.
© SAP AG TAMM30 4.0B 34-13
SAP AG
R
Analyses in Vendor EvaluationRANKING LIST
General vendor evaluationGeneral vendor evaluationOverall Price Qual. Deliv. ServiceOverallOverall PricePrice QualQual.. DelivDeliv.. ServiceService
90
84
81
92
75
90
90
92
76
93
88
74
85
81
84
Vendor B
Vendor A
Vendor C
EVALUATION PER MATERIAL/MATERIAL GROUPGeneral vendor evaluationGeneral vendor evaluation
Overall Price Qual. Deliv. ServiceOverallOverall PricePrice QualQual.. DelivDeliv.. ServiceService84
81
75
90
92
76
88
74
81
84
Vendor A
Vendor C
EVALUATION COMPARISONEvaluation for material 1Evaluation for material 1General vendor evaluationGeneral vendor evaluation
OverallOverall PricePrice QualQual.. DelivDeliv.. ServiceService
84 75 92 88 81Vendor AOverall Price Qual. Deliv. ServiceOverallOverall PricePrice QualQual.. DelivDeliv.. ServiceService
88 81 93 92 86
The Ranking list sorts your vendors in descending order according to their overall scores. This gives you an overview as to which vendors rank among the best, which perform moderately well, and which are below average. The scores for the individual main criteria are displayed in addition to the overall score. The system also calculates the average values for the individual scores, on the basis of which you can see by how many points a vendor deviates above or below the average value.
The list of Evaluations per material or material group provides you with a ranking list based on a certain material or material group. This analysis enables you to determine which vendors of a particularly important material have performed well, moderately well, or poorly. If you have entered a material group, you can specify whether the system is to search only for materials with a master record (1), only for materials without a master record (2), or for both (no entry) within this group.
The Evaluation comparison is an analysis that compares the general evaluation of a vendor with the latter’s evaluation in respect of a certain material. This analysis differs from the others insofar as you can use it to take a closer look at a vendor without comparing this vendor with others. Instead, the overall evaluation, which is composed of the scores relating to deliveries of all materials, is shown in relation to the evaluation the vendor would obtain if this evaluation were based on one certain material only.
© SAP AG TAMM30 4.0B 34-14
SAP AG
R
Configuration Options
XX
XX
XX
XX
Over. Over. PricePrice QualQual.. Del.Del. ServServVendor B
Vendor A
Vendor C
Points scores forautomatic
criteriaWeighting key
Listparameter
General control
parameters
Weighting of main criteria
Weighting of subcriteria
Main criteria
Subcriteria
Pur. org.-specific General
You make general settings for the following:
Weighting keys
Main criteria and subcriteria
List parameters and list structure
The following settings relate to an individual purchasing organization in each case:
Control parameters
Evaluation criteria and their weighting
Points scores for automatic subcriteria
The control parameters you can maintain for each individual purchasing organization include the following:
Best score
Applicability period
© SAP AG TAMM30 4.0B 34-15
SAP AG
R
Control Parameters: Purchasing Organization
General parametersGeneral parameters Parameters for subcriteriaParameters for subcriteria
Best score
Applicability period
Layout set
Price level
Single/sole vendor
Audit
Average of all lots
Rejection/complaints
As percentage of purchase volume
On-time delivery
Smoothing factor
Std. del. time variance
Min. deliv. percentage
Quantity reliability
Smoothing factor
Shipping instructions
Smoothing factor
Certain Customizing parameters for vendor evaluation are set on a purchasing-organization-specific basis. For example:
With the parameter Best score you specify the maximum number of points attainable by a vendor in your scoring range.
The Applicability period determines how far into the past data is used for the evaluation of a vendor.
The Layout set (form) determines the layout of the printed vendor evaluation sheet.
You also define which evaluation criteria are to be relevant for each purchasing organization and how they are to be weighted. Furthermore, each purchasing organization defines its own scoring range for the evaluation of the automatic subcriteria.
© SAP AG TAMM30 4.0B 34-16
SAP AG
R
Vendor Evaluation: Summary
Vendor Evaluation supplies you withsummary information on your vendors andsupports you in the process of vendorselection.
Various maintenance functions are availableto evaluate vendors.
Evaluation with respect to automaticsubcriteria is based on normal onlineactivities. Customizing settings decide whichpoints score is awarded for which aspect of avendor’s performance.
© SAP AG TAMM30 4.0B 34-17