Supplier Evaluation vs Supplier Qualification: What Are the Differences?
Many procurement teams mix up supplier evaluation with supplier qualification. Supplier Evaluation is the wider, evidence based supplier assessment process covering technical capability, quality systems, capacity, delivery reliability, commercial terms and total supplier risk. Supplier qualification is the smaller gate keeping decision, which is determining a supplier is qualified to be approved to do business with the City.
The two processes are similar, but not identical. But even after a detailed evaluation, a supplier might not be qualified if it is missing a certification or legal registration. A supplier may be fully qualified and yet may be disqualified from a particular project because he or she has deficiencies or limitations revealed by the evaluation. Relying on the same term each time results in flaky approval processes and increased sourcing risk.
What Is Supplier Evaluation?
Supplier evaluation is an evidence-based procurement process to establish if a potential or existing supplier has the ability to deliver an acceptable level of risk for the buyer's requirements. It investigates capability, quality, delivery, cost and commercial fit and is used to compare the product/service being bought against the real product/service.
The depth of evaluation should be commensurate with the importance of the purchase. For standard low risk catalog items, a light commercial/compliance review may be sufficient. For custom components, high volume programs, safety critical parts, regulated components, OEM, or strategic suppliers, more technical, process and operational assessment is desired.
Supplier Evaluation: A Structured Procurement Process
Supplier evaluation is not just a questionnaire, a certificate or a factory visit. It is a systematic procedure designed to gather and evaluate several forms of evidence. Commonly buyers will check product specifications, quotations, technical drawings, samples, test reports, process capability data, equipment list, quality records, capacity information, commercial terms, certifications, customer references, audit report findings and historical delivery performance.
The aim is to establish a clear picture of the ability of the supplier to deliver the required product/service under actual production conditions.
Assessing New Suppliers and Existing Suppliers.
New suppliers are assessed prior to granting them substantial business. The intent is to determine if they are to be called for a quotation, included on a trial order or placed on an approved supplier list. Actual performance data is used to evaluate existing suppliers. A supplier could offer a good sample and low cost quote one day, only to repeatedly experience late deliveries, substandard materials, delays in the corrective action process, and inadequate communication with the production. Performance gaps are more important than initial marketing promises.
Supplier Evaluation Must be in Line with the Buyer's True Need
A supplier is not “good” or “bad” at all. The ability should be evaluated in the context of the requirement. A good factory for metal parts may not be good for a tighter tolerance or regulated product because it may not have the tolerances, materials, traceability or controlled environment necessary. Customers should compare with actual specification, annual quantity, quality standard, lead time requirement, application area and commercial application area. Don't let buzz words like “professional manufacturer” or “experienced OEM factory” stand in place of product-specific proof.
Supplier Qualification: What It Is?
Supplier qualification is a method for determining if a supplier has met the minimum requirements for approval to conduct business with the buyer. The results are usually binary or nearly binary, such as approved, conditionally approved, or rejected.
Part of the evaluation process is qualification. A supplier can have been approved as a supplier, but not be placed on a specific project or order.
The minimum requirements and the criteria for approval are provided below.
Qualification requirements typically consist of legal registration requirements, required certifications, quality-system requirements, compliance documents, technical capability requirements, completion of audits, product experience, or approved samples. The requirements are dependent upon product classification, industry, and destination and company policy.
Clinically, it may be necessary to have ISO 9001 certification, an audit, approved samples, and export documentation. If a supplier fails on any of the mandatory items, then that supplier may be rejected even if other items may seem good.
Two were rated as Gatekeeping decisions:Two were qualified as Gatekeeping decisions:
Qualification is a "gate. It determines whether a supplier can be added to the approved supplier list, receive RFQs, be in a competitive bidding process or be considered for awards. But qualification doesn't ensure business. It simply indicates that the supplier has met the minimum standard of the bar. Some factors like price, capacity, technical fit, delivery reliability and strategic value are still considered for final selection.
Qualifications and Requirements that Apply if a Student is Conditionally Qualified.
A supplier may be conditionally qualified if it has demonstrated adherence to most of the requirements, but is required to take certain further steps. Common conditions are corrective actions, additional documentation, sample approval, audit closure, production validation or successful trial orders. Conditional qualification must have a clear owner, clear deadline, documented condition and follow up review. It should never be in an informal state that it leaves unaddressed risks concealed.
Key Differences Between Supplier Evaluation and Supplier Qualification
Supplier evaluation and supplier qualification serve different purposes in the procurement workflow. Evaluation builds the evidence base. Qualification makes the approval decision.
Aspect | Supplier Evaluation | Supplier Qualification |
|---|---|---|
Main Question | Can this supplier meet our requirements consistently and with acceptable risk? | Does this supplier meet our minimum approval requirements? |
Scope | Broad assessment of capability, quality, delivery, cost, risk, and performance | Narrow focus on mandatory approval criteria |
Timing | Before and after supplier approval; ongoing throughout the relationship | Before supplier approval; revisited when requirements change |
Outcome | Assessment findings, risk review, score, or improvement actions | Approved, conditionally approved, or rejected |
Relationship to Selection | Supports informed supplier selection | Determines eligibility to be considered for selection |
Purpose and Scope
Evaluation is broader. It considers technical ability and capacity, quality systems, commercial suitability and continued performance risk. Qualification is less broad and has a narrower scope; it does not refer to the extent to which the criteria were met but rather to whether they were met. A buyer can inspect a supplier's process control, equipment and communication in great detail, and then just send it to the supplier for a certificate, legal status and audit.
Timing and Frequency
Evaluation is done before, after, and during the approval process and maintains ongoing relationships through performance review and scorecards. It will usually be required prior to being permitted to trade with a new supplier, and will be re-attempted if a certification expires, if the ownership changes or if new regulations are introduced.
Outcome and Decision Type
Evaluation yields results, risk notes, scores or recommendations for improvement. Qualification results in an Approval status. A high evaluation does not automatically meet the qualification requirements if a necessary requirement is not included.
The relationship between the buyer and the supplier.The ties between the buyer and the supplier.
Supplier selection is the point at which a business chooses to contract with one or more suppliers, following the review of suppliers. Comparative factors include: Price, Technical fit, capacity, quality history, delivery reliability, location, strategic value. Selection to be based on evidence of evaluation and qualification. Rather, identifying a preferred supplier first and collecting evidence afterwards will create some bias and obscure critical risks.
The subjects below.See our guides on the following subjects for more in-depth reading. What Is Supplier Evaluation? A Complete Guide for Procurement Professionals, Supplier Evaluation vs Supplier Selection: Understanding the Difference, and Supplier Evaluation Process: 7 Steps to Assess a Potential Supplier.
How Supplier Evaluation and Qualification Work Together
Evaluation and qualification are related. Evaluation provides evidence. Qualification is the basic requirement, and the qualification process results in the approval decision.
Evaluation is used to validate evidence for making decisions to qualify
These evaluation results are used by buyers to determine if the supplier fulfills the required conditions or if there are residual risks and/or conditions that need to be included in the approval. The qualification judgment is based on technical capability, quality-system maturity, capacity and past performance data.
Qualification Sets the Minimum Bar for Business
Qualification safeguards the buyer, as it guarantees that all approved suppliers meet a defined minimum standard. Does not guarantee orders. Even a qualified supplier can forfeit a project because of technical fit, capacity, or price.
The evaluation process takes place after the qualification stage.
Only a certain number of people are qualified to perform a role, but that does not automatically mean they will keep doing so. Score cards, quality audits, delivery monitoring and periodic reviews must be conducted to ensure ongoing evaluation. Re-evaluation and possible re-qualification may be necessary due to capacity limitations, deterioration in quality, transfers of ownership or process drift.
Common Mistakes When Confusing Evaluation and Qualification
The two concepts of evaluation and qualification are different and if treated as such, predictable procurement failures occur.
It is perfectly acceptable to treat the Qualification as the complete Evaluation.
Some teams only approve a supplier once the required criteria have been met and that's it. The supplier might have all of the necessary certificates, but might not have the equipment, process control, or testing to produce the product. The qualification is only the initial step; further assessment is necessary before meaningful business is acquired.
Facing a set of questions without being required to provide a response.Avoiding qualification and answering only questions of evaluation.
Other teams carry out in-depth capability evaluations, but do not actually certify the necessity to meet legal requirements (e.g. legal registration, certifications, compliance documentation and export capability). The supplier might be impressive on technical and commercial considerations but might cause legal, compliance and logistics issues that would have been identified during the qualification process.
When companies are not QS they are never suitable until they are declared as such.
You can qualify a supplier, but it is not the right thing to do for every project. Business awarded based solely on the qualification award status and without project specific capacity, technical fit or delivery reliability can contribute to late delivery, quality problems or lack of capacity.
Practical examples of evaluation and qualification in action.
Example 1: New Supplier Onboarding
Three suppliers are being considered by a buyer for a new metal component. The evaluations performed include technical capability, process capability studies, quality systems, capacity and commercial terms. Two suppliers qualify (to ISO 9001, audit completed, samples approved, export documentation) and are placed on the approved supplier list. The third is rejected because it does not meet the necessary certification. Once a specific project is considered, the buyer will choose the qualified supplier that is most suitable for the project according to the capacity and technical scoring results of the evaluation.
Example 2: Existing Supplier Performance Review
An existing supplier is assessed on quality, delivery and responsiveness on an annual basis by a scorecard. The performance of delivery has fallen. Buyer makes a corrective-action request. The supplier is re-qualified by the buyer with ongoing monitoring after the supplier has demonstrated improvement on an ongoing basis and renewed an expired certification. If there wasn't continuous data to evaluate performance, it's possible that the decrease in performance would not have been identified until a serious disaster hit.
Example 3: High-risk or strategic sourcing.
The buyer performs a deeper review, which includes technical capability, process control, financial stability, supply continuity and compliance for a safety critical component before making a qualification decision. Two of the five candidates qualified only to the demanding standards. The next step in selecting from the qualified suppliers is to make a comparison of capacity, total cost of ownership, and long-term risk.
Final Takeaway: Clear Distinctions Lead to Better Supplier Decisions
Supplier evaluation is not the same as supplier qualification. Assessment is the gathering of data to gain insight of capability and risk. Approval is the minimum standard of qualification and determines whether a supplier should be able to do business. Both processes are utilized explicitly by professional buyers: evaluation in order to understand the supplier, qualification in order to safeguard the company, and selection to choose amongst the approved suppliers. The boundaries between these steps are important to reduce sourcing risk, enhance the approval discipline and enable more reliable long-term supplier relationships.
Delve deeper into related practice guides for supplier evaluation criteria, supplier checklists, and supplier performance to build up your complete supplier management process.