Lean Service Procurement and Vendor Evaluation

This blog has been derived from the transcript of a Lean Service Procurement and Vendor Evaluation Session held as part of our Excellence SAP Sourcing and Procurement (SAP MM) program, led by Parminder. For a more in-depth understanding, we invite you to explore the comprehensive video by following the link provided below.

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Supplier Risk Management Prioritization

Parminder emphasized the importance of managing supplier categories and the role of the display supplier application in providing analytics and risk assessments. They highlighted the application's ability to classify vendors based on financial, logistics, quality, political, and social responsibility risks.

neha suggested that the quality team could provide inputs on supplier risk at the time of quality acceptance. It was agreed that this information would be crucial in identifying alternative suppliers. parminder discussed the process of obtaining information from suppliers during the onboarding phase, including submitting various documents like tech certificates and filling out a detailed form. They stressed the significance of supplier audits conducted by various teams to ensure suppliers meet necessary standards and requirements. parminder also highlighted the need to categorize suppliers based on various parameters such as risk and quality to identify potential risks and guide mitigation strategies.

Vendor Compliance and Evaluation Process

Parminder emphasized the importance of maintaining vendor compliance and evaluating them based on multiple parameters such as quality, delivery time, and price. They introduced a new functionality for the evaluation process, vendor evaluation with questionnaire, and explained how scores are assigned based on these parameters.

Parminder also highlighted the necessity of checking a vendor's financial risk and transparency in disclosing financial results. They concluded by stating that vendor evaluation could be done directly from documents like purchase orders and invoices and that operational problems and potential financial risks should be taken into account during the assessment process.

Vendor Evaluation and Development Importance

Parminder discussed the importance of vendor evaluation and the potential risks associated with sole source suppliers, emphasizing the need for understanding the importance of each supplier. They suggested investigating alternative sources before taking drastic measures such as blocking a vendor.

They also highlighted the importance of vendor development in the sourcing process, explaining its role in ensuring compliance, improving services and products, implementing labor and environmental policies, resolving quality issues, and assisting with conflict resolution. parminder stressed that vendor development is crucial in maintaining a robust supply chain and highlighted the need for cyber resiliency in vendors. They shared an example of successful collaboration with Bajaj Auto Limited, where the vendor development department played a pivotal role in monitoring and supporting the vendor.

SAP System and Project Management Tools Discussion

Parminder discussed the use of project management tools such as activity management and Jira in the SAP system for action monitoring and risk assessment. They emphasized the addition of new sourcing elements in SAP S/4HANA, including vendor revolution with questionnaires, activity management, category management, and vendor classification.

Neha raised a question about the visibility of vendor evaluations and activity management in specific tiles in SAP, to which parminder clarified that while there are different applications for these tasks, they do not have a strong linkage. parminder further explained the procurement and purchase order system, the importance of analyzing quality and vendor resolution scores, and the concept of category management. They also differentiated between vendor classification and categorization, and supplier classification within the category management system.

Negotiation Sheet, Vendor Prices, and Operational Scores

The meeting revolved around the concept of a buyer negotiation sheet, a tool used to monitor variances in delivery quantity and quality, and vendor invoices. Vijayakrishna explained the current evaluation process, which goes beyond operational matters and includes strategy, initiatives, and potential risks. parminder clarified the buyer negotiation process, which involves renegotiating prices with vendors when contracts expire. They also discussed the availability and calculation of operational scores for Hannah and the need for a program to calculate these scores. The process of creating and combining questions into different vendor evaluation questionnaires was also discussed, along with the lack of significant improvements on certain functionalities since their introduction in 2016-2018.

Vendor Evaluation Template Creation Process

Parminder discussed the process of creating and assigning a template for vendor evaluations. They explained that evaluators, who would be employees, would conduct audits and discussions with vendors and submit their evaluations. The system would calculate scores from different questionnaires, with weights assigned to each, to create a vendor scorecard. Multiple evaluators were confirmed to be possible, and separate questionnaires could be created and assigned to different users based on their areas of responsibility. Concerns were raised about integrating the system with excel uploads, but Parminder advised against expecting too much from the existing system. The company's approach to auditing strategic suppliers was also discussed, involving inspections every six months to three years and using excel forms to record the results.

Supply Evaluation - Monitor Supplier Scores Process

Parminder discussed the operational supply evaluation process, emphasizing the ability to monitor responses and calculate scores. They highlighted the need to adjust scores and define weightage for overall scoring at the vendor level.

They also mentioned the possibility of viewing the evaluation score history and the availability of different scores from vendors. However, they noted that there were no scores available in some areas and questioned why there was no evolution data, as no questionnaires had been maintained in the system. They concluded by stating that questionnaire-based evaluations could also be viewed and scores could be adjusted.

Task Assignment and System Limitations Discussion

Parminder assigned neha a task related to vendor evaluation which involves creating questions and import them from an Excel file. parminder also guided neha to watch a video on how to create questionnaires using a certain application. Furthermore, parminder discussed the limitations of the current activity management system in terms of procurement, highlighting that it lacks advanced features such as analytics, forwarding, and search functions. parminder emphasized the importance of documenting activities and decisions for knowledge transfer and to avoid knowledge loss when employees leave the company.

Procurement Activity Management Tools Demonstration

parminder explained the use of various tools for managing procurement-related activities and creating projects. They demonstrated the process of creating an activity, assigning a person responsible, setting a start and end date, and involving suppliers. parminder proposed linking the activity creation person with a char mini master, as suggested by neha. They also mentioned the use of supplier categories as a filter criteria for selecting suppliers based on specific categories. Furthermore, parminder discussed the availability of neha and Pooja to work on a project and detailed the process of creating an activity, which involves assigning tasks to specific individuals.

Explore the comprehensive details of the Excellence SAP Sourcing and Procurement (SAP MM) program, spearheaded by Parminder, by clicking on the following link.

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