Supplier Evaluation vs. Audit: What's the Difference?

Confused about the difference between supplier evaluation and audit? Learn about the key differences and which one is right for your business.

As businesses continue to rely on suppliers to provide goods and services, it becomes increasingly important to ensure that the suppliers are meeting the required standards. Two common methods of assessing supplier performance are supplier evaluation and audit.

While both methods have similar goals, they differ in terms of their approach and scope. In this article, we will explore the differences between supplier evaluation and audit and provide insights on how businesses can benefit from each approach.

What is Supplier Evaluation?

Supplier evaluation is a process of measuring and monitoring supplier performance based on predefined criteria. It involves assessing a supplier's capability to meet the buyer's requirements, including quality, delivery, price, and service. Supplier evaluation is usually carried out using a supplier scorecard, which is a tool that measures supplier performance against specific metrics.

Advantages of Supplier Evaluation

Supplier evaluation allows businesses to identify the best suppliers based on their performance.
It helps to reduce supplier risk by selecting reliable suppliers.
It enables businesses to continuously monitor supplier performance and make improvements where necessary.

Disadvantages of Supplier Evaluation

Supplier evaluation may not capture all aspects of supplier performance, such as ethical practices.
It can be time-consuming and resource-intensive.
It may not be suitable for assessing suppliers that provide complex goods or services.

What is a Supplier Audit?

A supplier audit is a process of examining a supplier's operations, processes, and systems to determine if they meet the buyer's requirements. It involves a comprehensive review of the supplier's management systems, including quality, environmental, and health and safety management systems.

Advantages of Supplier Audit

Supplier audit provides a detailed assessment of the supplier's capabilities and processes.
It helps to identify areas where the supplier can improve their operations.
It can be used to assess compliance with legal and regulatory requirements.

Disadvantages of Supplier Audit

Supplier audits can be intrusive and disruptive to supplier operations.
It may only provide a snapshot of supplier performance, as it is conducted at a specific point in time.
It can be costly and time-consuming.

Key Differences between Supplier Evaluation and Audit

Scope

Supplier evaluation is focused on assessing a supplier's performance against predefined criteria. It provides a quantitative assessment of a supplier's performance, based on metrics such as quality, delivery, and price.

A supplier audit, on the other hand, is a comprehensive review of a supplier's operations and processes. It provides a qualitative assessment of a supplier's performance, based on the effectiveness of their management systems.

Frequency

Supplier evaluation is usually conducted on a regular basis, such as annually or quarterly. It provides ongoing monitoring of supplier performance and allows businesses to identify trends in supplier performance over time.

Supplier audit, on the other hand, is typically conducted on an ad hoc basis. It is usually carried out when there is a need to assess a supplier's capabilities in more detail or when there are concerns about the supplier's performance.

Approach

Supplier evaluation is a data-driven approach to assessing supplier performance. It involves measuring supplier performance against specific metrics and providing feedback to suppliers on their performance.

Supplier audit, on the other hand, is a process of assessing a supplier's operations and processes in detail. It involves reviewing documents, conducting interviews, and observing supplier operations.

How to Choose Between Supplier Evaluation and Audit?

The choice between supplier evaluation and audit depends on several factors, including the business's objectives, the nature of the goods or services being supplied, and the resources available for assessment.

Supplier evaluation is best suited for assessing suppliers that provide standard goods or services and where the risk is relatively low. It is also suitable for ongoing monitoring of supplier performance.

Supplier audit, on the other hand, is best suited for assessing suppliers that provide complex goods or services and where the risk is high. It is also suitable for assessing compliance with legal and regulatory requirements.

When choosing between supplier evaluation and audit, it is important to consider the resources available for assessment. Supplier evaluation is usually less resource-intensive than supplier audit, which can be time-consuming and costly. It is also important to consider the business's objectives and the outcomes they hope to achieve from the assessment. For example, if the business is looking to reduce risk, a supplier audit may be a more suitable option.

Conclusion

In conclusion, supplier evaluation and audit are two methods of assessing supplier performance. While both approaches have similar goals, they differ in terms of their scope, frequency, and approach. Supplier evaluation is focused on measuring supplier performance against predefined criteria, while supplier audit involves a comprehensive review of a supplier's operations and processes.

When choosing between supplier evaluation and audit, it is important to consider the nature of the goods or services being supplied, the business's objectives, and the resources available for assessment.

FAQs

What is the main difference between supplier evaluation and audit?

The main difference between supplier evaluation and audit is their scope. Supplier evaluation is focused on assessing a supplier's performance against predefined criteria, while supplier audit involves a comprehensive review of a supplier's operations and processes.

When should a business conduct supplier evaluation?

A business should conduct supplier evaluations on a regular basis, such as annually or quarterly, to monitor supplier performance and identify trends over time.

When should a business conduct a supplier audit?

A business should conduct a supplier audit when there is a need to assess a supplier's capabilities in more detail or when there are concerns about the supplier's performance.

Which method is more suitable for assessing compliance with legal and regulatory requirements?

Supplier audit is more suitable for assessing compliance with legal and regulatory requirements, as it involves a comprehensive review of a supplier's management systems.

Can supplier evaluation and audit be used together?

Yes, supplier evaluation and audit can be used together to provide a more comprehensive assessment of supplier performance. Supplier evaluation provides ongoing monitoring of supplier performance, while supplier audit provides a detailed assessment of a supplier's capabilities and processes.

Micro SCM