How to Perform a Supplier Evaluation

Four methods for performing a supplier evaluation, and how each method can be employed

Supply chain management (SCM) has been defined as “the design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.”¹ With the advent of the Covid-19 pandemic, the importance and, fortuitously, vulnerability of a number of supply chains have been highlighted. This is especially true with the disruption of overseas supply chains for personal protective equipment (PPE), e.g., gloves and masks, and pharmaceuticals.

Suppliers can be considered third-party organizations, but they are also extensions of your organization. One aspect of managing suppliers is to evaluate their capabilities to supply items or services that meet your requirements or specifications at a fair price, with on-time delivery, and appropriate customer service and support.

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Comments

2nd or 3rd Party

Hello Steven:

Why would a supplier be considered a third party? Who are the 3 parties in this structure?

First party: An organization. No other parties are involved.

Second Party: An organization and another organization, often a supplier.

Third Party: The organization, a supplier, and the benefactor of the outcome of the audit or project, often a customer or multiple customers.

Thank you, Dirk van Putten

Meaning of a Third-Party Supplier

Dirk,

I understand your dilemma; by talking about how suppliers can be considered third-party organizations, it implies there is first and second party and they are not defined.

I believe the term third-party supplier has been around for some time; an article by Deloitte, titled ‘Third party suppliers background due diligence’, uses the term: “third party suppliers). (https://www2.deloitte.com/cn/en/pages/finance/articles/deloitte-bis-2-p…)

The following is a definition:

A 'third party', as defined in OCC 2013–29, is any entity that a company does business with. This may include suppliers, vendors, contract manufacturers, business partners and affiliates, brokers, distributors, resellers, and agents. (https://en.wikipedia.org/wiki/Third-party_management)

I would explain the three parties as:

First-Party = Your Organization

Second-Party = Your customer (mostly external, but could be internal)

Third-Party = Your supplier

The important take-away is that a Third-Party supplier can impact your customer (Second-Party) in a positive or negative way, and they are independent from your organization (First-Party), and are usually not known to your customers.