How can improving supplier relationships improve compliance?

Supplier evaluation under sustainability aspects - The 6 most important questions

Supplier management as a success factor

In view of globalization, companies are increasingly networking their supplier management with the upstream stages of the supply chain. These complex structures increasingly require professional management across all delivery levels (tier) of your company. It is important to make important decisions, for example on

  • Supplier selection,
  • Supplier planning,
  • Supplier integration,
  • Supplier evaluation and
  • Supplier development.

The correct selection, evaluation and qualification of suitable suppliers is a decisive competitive factor in global procurement. The more carefully and sustainably your company handles supplier management, the more benefits will arise - for your company, your customers and suppliers. Where the benefits become apparent quickly, however, security aspects must also be considered. This applies to industry-specific regulations and criteria as well as national and international legislation.

Systematic supplier evaluation

For companies, sustainability also means including their supply chain. Read our free whitepaper more about:

  • relevant sustainability issues
  • suitable evaluation criteria
  • common verification procedures
  • Monitoring and evaluation of the results
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If you take key aspects like Compliance or risk management, it becomes clear why the supplier evaluation including CSR aspects * is a strategic decision for ongoing corporate success.

* Corporate Social Responsibility, or “CSR” for short, is the social responsibility of companies in terms of sustainable management.

Sustainable supplier evaluation: necessity or illusion?

Companies that want to evaluate their suppliers with regard to sustainability not only have to open up the numerous facets of ecological, economic and social aspects with their diverse design variants, but also understand the structures and mechanisms prevailing in the market. Even if the references and guidelines on the subject of sustainability focus on a few sources such as those from the ILO, the OECD or the UN Human Rights Charter, a large number of international sustainability initiatives and standards as well as industry solutions have established themselves on the markets. To make matters worse, the standards usually do not recognize each other.

"Supplier evaluation including social responsibility is a strategic decision for long-term corporate success."

The central questions are:
- Which sustainability topics are relevant?
- Which criteria, methods and tools are suitable for evaluating suppliers?
- How are the results evaluated?

Supplier evaluations - 6 questions, 6 answers

1. What are the advantages of involving suppliers?

The benefits of a sustainable assessment and the targeted integration of suppliers in your own value creation processes are obvious: through close and trusting cooperation with your suppliers

  • ensure the consistent quality of your products,
  • ensure efficiency in purchasing and procurement,
  • guarantee delivery capability and adherence to deadlines,
  • prevent financial damage and loss of image,
  • you live up to your social and ecological responsibility,
  • limit risks and compliance violations,
  • increase customer satisfaction and loyalty and
  • consolidate your competitiveness.

DQS Digital Quality Space 2.0

We invite: secondONLINE CONGRESS at the June 24, 2021

That means: illuminating the topics of the time and daring to take a look at what will occupy us in the future. Also in terms of global supply chains and global responsibility.

View the lecture offer. Log In. To be there.

2. What are the challenges of complex supply chains?

The increasing complexity of the supplier markets as well as multi-layered and transnational supply chains require ever greater transparency and interlinking between supplier and company.

The more global your suppliers are, the more linguistic and cultural hurdles arise. There are also legal, normative and customer-specific requirements that must be observed and complied with. The correct selection, evaluation and regular qualification of suitable suppliers are therefore decisive for the success of your company.

The following points are essential:

  • to accompany the outsourcing measures intensively,
  • determine relevant criteria and key figures,
  • to initiate continuous improvement processes and
  • evaluate the effectiveness of the measures taken.

3. How do you proceed with the supplier evaluation?

Effective supplier evaluations assess the entire organizational and technical performance of individual suppliers - based on the actual status and with reference to the target status. These include, for example

  • the appraisal or assessment of the supplier relationship,
  • a vulnerability analysis as well
  • the review of the supplier portfolio, including short-term relief in the event of resource bottlenecks.

The important thing is to be relevant criteria or to determine a suitable catalog of criteria according to which your suppliers are to be evaluated.

In addition, it makes sense to develop a matrix that, taking into account the delivery stage that a supplier takes in the chain, shows the existing risk and thus enables prioritization. From this, the necessary measures can be assigned, such as audits for indispensable suppliers with high risks.

4. What are the immediate benefits of the supplier evaluation?

The evaluation of your suppliers ensures legal security for your company. It limits risks and provides your customers with a visible qualification. You determine the quality goals and obligations for your external providers and can thus systematically compare and evaluate the suppliers with one another.

Existing supplier relationships can be further developed and optimized on the basis of the assessment. It also shows that you are improving the added value of your company in a sound and continuous manner - and that you are fulfilling your responsibility, for example in terms of social sustainability.

5. What can a supplier evaluation look like with DQS?

In our (customer-specific) Supplier audits we take a neutral look at the stability and resilience of your processes and interfaces and analyze the process consistency and process continuity. Furthermore, we support you in the continuous improvement of your internal supplier management processes and optimize your risk management together in order to limit compliance violations. This is particularly important with a view to the future supply chain law and due diligence law.

Supplier audit with DQS

How good are your external providers? Our customer-specific supplier audits reveal strengths and weaknesses across the entire supply chain.

6. What do you have to clarify before a sustainable supplier evaluation?

Together you determine how to proceed and clarify the following questions:

  • What are the key sustainability requirements for your industry based on?
  • Why are CSR requirements placed on suppliers?
  • Who makes these requirements and to whom?
  • What are the options for testing and assessments - which criteria are used as a basis?
  • How can the fulfillment of the requirements be proven?
  • Which solutions are suitable for your supply chain?
  • How can an individual sustainability profile be determined?

What does a criteria catalog for the supplier evaluation look like?

A (customer-specific) CSR supplier audit or the assessment of your suppliers under sustainability criteria should ideally be preceded by a so-called materiality analysis or specific profile analysis. With the help of these methods, your company can first determine its own sustainability profile and, if necessary, ignore non-relevant CSR requirements. An evaluation matrix for the suppliers can be derived from the analysis of the relevant criteria, the risks and the scope of your organization.

A two-axis matrix is ​​used: the relevance of a topic for the relevant interested parties is plotted on one axis, and possible effects on (or through) the business on the other axis. The place at which the topic is placed within the matrix says something about its essentiality. Criteria catalogs and specific fields of action can be derived from the analysis - both for your company and for your partners in the supply chain. Ideally, the results of the materiality analysis have the same effect as the codes of conduct that large companies impose not only on themselves but also on their suppliers.

Supply Chain Act - The legislature is arming

In supplier management, it is becoming apparent that legislation is gaining in importance as a driver. In the area of ​​sustainability, it is characterized by a gradual transition. The development ranges from “island” regulations, such as the obligation to report on non-financial key figures, to the systematic recording of sustainability issues, especially with a focus on due diligence. The future supply chain or due diligence law is intended to further develop the international human rights situation by laying down requirements for the responsible management of supply chains for certain companies.

Supply Chain Act: Government draft available

In February 2021, the legislators in Berlin and Brussels presented their ideas for a supply chain law and due diligence law at almost the same time. Now the drafts are also available - read more on the DQS blog.

Many voluntary sustainability initiatives and their criteria are also increasingly being replaced by mandatory, verifiable and enforceable regulations. Goals such as those of the United Nations, which are listed in the Sustainable Development Goals (SDG), have a strong recommendation character, e.g. with regard to the environment. Sector-related initiatives, such as Together for Sustainability from the chemical industry or data platforms for transparency in the sustainability commitment of companies such as SEDEX, on the other hand, are often mandatory for suppliers due to customer requirements.

Tip: This is what ISO 9001 requires for supplier evaluation

The internationally recognized standard for quality management also requires measures for dealing with suppliers. Here is a selection of those standard chapters ISO 9001related to the topics of external providers and supplier evaluation:

  • Understanding the organization and its context (Section 4.1)
  • Understand the needs and expectations of interested parties (Section 4.2)
  • Measures for dealing with risks and opportunities (Section 6.1)
  • Control of externally provided processes, products and services (Section 8.4 and Appendix A.8)
  • Risk-based thinking (Appendix A.4)

Supplier evaluation:We can do that for you

As an internationally recognized certifier for management systems and processes, theDQS on more than 30,000 audit days a year. Our claim begins where audit checklists end: Take us at our word! We look forward to talking to you and will be happy to show you what the performance and quality of our Audits is based.

Namely on

  • competent and honest auditors with industry experience
  • tailor-made solutions that are appropriate to your organization and management system
  • targeted identification of possible weaknesses and risks
  • objective, comprehensible results and substantial decision-making aids
  • internationally recognized certificates with high market acceptance
  • the tracking of audit / analysis results including the effectiveness check of the measures taken
  • the individual development and creation of criteria catalogs and evaluation systems

DQS supplier audit

Our supplier audits focus on the question: What do the market, customers and your interested parties demand from you in terms of sustainability? Inform yourself. Free of charge and without obligation.

We look forward to talking to you