Vendor Evaluation Process

Vendor evaluation is the process of analysing and assessing the performance of the
vendors of the external vendor. In this processes vendors are allowed to score in
different criteria and the highest scored vendor is selected for procurement.

In our company, we have checking of performance of vendors based on different

criteria for giving ranking and that is call Vendor Evaluation.

We have to 4 Criteria's:

1. Price
2. Quality
3. Delivery
4. Service

The standard SAP System offers you a scoring range from 1 to 100 points, which is used to
measure the performance of your vendors on the basis of five main criteria. You can
determine and compare the performance of your vendors by reference to their overall scores.
The main criteria available in the standard system are:

• Price • Quality • Delivery • General service/support. These four main criteria serve as a
basis for evaluating vendors from whom you procure materials. • External service provision
This main criterion serves as a basis for evaluating those vendors you employ as external
service providers

You can also define other or further main criteria, as required. You can assign different
weights to the individual criteria. The vendor’s overall score is computed taking into account
the weighted scores awarded for each of the main criteria

Vendor Evaluation is set and maintained at the purchasing-organization level, where

procurement and purchasing responsibility resides.

Procurement
 Price. Vendors offering the most competitive price score high.

 On-time delivery. Meeting on-time delivery schedule or within

predefined delivery tolerances ensure high scores.

 Shipping instructions. Adhering to the company's predefined shipping

instructions gives such vendors higher scores.
Quality
 Quality score from goods receipt inspection. The quality inspection
process entails recording results and defects of materials received from
vendors, followed by making the decision to use the material or not. This
quality inspector's decision is known as usage decision (UD), which
consists of not only a UD code, but also has an associated predefined
quality score. For example, a UD code "A" represents "Accepted," with a
quality score of 100, while a UD code "A1" represents partially
accepted, and has a quality score of 70. A lower-quality score leads to a
more unfavorable assessment of a vendor.

 Quality notifications as complaints. The number of vendor complaints

received in the form of quality notifications reflects the rejection level of
vendor-supplied material.

Customizing Vendor Evaluation (II)

 Define Weighting Keys

o define the weighting keys for the main criteria of vendor evaluation
 Define Criteria
o define the criteria by which the system computes scores for vendors
o specify whether the scores for the sub-criteria are computed manually, semi-automatically, or
automatically
o can activate user exit: customer's own program to determine score

1. SPRO > MM > Purchasing > Supplier Evaluation> Define Weighting Keys
Select.
Equal Weighting
Unequal Weighting
2. SPRO > MM > Purchasing > Supplier Evaluation > Define Criteria

Price,
Quality,
Delivery,
Service

For each criteria you will have Sub criteria

Criteria Sub-Criteria
Price, 1. Price level,2.Price List
Quality, 1.Goods receipt,2.Quality Audit
Delivery 1.On time deliver,2. Confirmation,Shipment Instruction
Service 1.Invoice, 2. Flexibility

3. SPRO > MM > purchasing > Supplier Evaluation > Define Scope List.
4. SPRO > MM > purchasing > Supplier Evaluation > Maintain Purchasing Organization
Data
5. Use T-code – ME61 for Vendor Evaluation (Do it for 2-3 Vendors)

To generate a report, use t–code ME6H

Evaluation sheet, use t– code ME6F For all vendors

Ranking list of vendors t-code ME65

Vendor Evaluation Transaction Code

 ME61 (Maintain)
 ME62 (Display)
 ME63 (Automatic New Evaluation)
 ME64 (Compare New Evaluation)
 ME65 (Evaluation Lists)
 ME6A (Changes to Vendor Evaluation)
 ME6B (Display Vendor Evaln. for Material)
 ME6C (Vendors Without Evaluation)
 ME6D (Vendors Not Evaluated Since...)
 ME6E (Evaluation Records Without Weighting)
 ME6F (Print)
 ME6G (Vendor Evaluation in the Background)
 ME6H (Standard Analysis: Vendor Evaluation)
 ME6Z (Transport Vendor Evaluation Tables)