VENDOR EVALUATION GENERAL OVERVIEW AND CUSTOMIZING

Table of Contents Vendor Evaluation - Introduction Scope of Functions Scores and Criteria Customizing Transactions Technical Data Tables Customizing Tables Purpose – why Intro of project mgmt, sponsor Overall summary of project Summary of each workstream and dependencies Specific roles Defining scope deliverables Tasks to be completed Timelines What the project expects from you Croom Communication: Collaboration, blog, wiki,

Vendor Evaluation - Introduction Vendor Evaluation component supports you in optimizing your procurement processes in the case of both materials and services.

Vendor Evaluation - Introduction This is done in TA ME61 and ME63 :

Scope of Functions Procurement of Materials The Vendor Evaluation component helps you select sources of supply and facilitates the continual monitoring of existing supply relationships. It provides you with accurate information on prices, and terms of payment and delivery. By evaluating vendors, you can improve your enterprise's competitiveness. On the basis of detailed information, and in collaboration with the relevant vendors, you can quickly identify and resolve any procurement problems that may crop up from time to time. Procurement of Services You can check the reliability of the vendors from whom you procure services on a plant by plant basis. You can determine whether the vendors perform the services within the specified timeframes and appraise the quality of the work carried out. .

Scores and Criteria The scores for Main Criteria are calculated from the scores of the Subcriteria. The Subcriteria scores can be: Manual – scoring method '_' You enter the score into the system yourself before carrying out an evaluation. Semi-automatic – scoring method 1, C and D You enter scores for quality and timeliness of delivery or performance at info record level (for a material) or in the service entry sheet (for an externally performed service). For scoring method 1 a score can be entered for each info record. Info records are based in the relation vendor X material. The score for the Subcriteria then corresponds to the average score for all info records.   Fully automatic – scoring method 2 to 9, A and B In the case of the automatic the scores are calculated automatically.

Material management -> Purchasing -> Vendor evaluation Customizing Material management -> Purchasing -> Vendor evaluation

Customizing - Define Weighting keys (OMGC) By using weighting factors, you can increase or reduce the importance of certain criteria when a score is calculated at the next highest level. Suppose a vendor receives 80 points for the criterion "Price" and 80 points for the criterion "Service". Since the price of the material is more important to you than the service the vendor provides, you assign the criterion "Price" a weighting factor of 3 and the criterion "Service" a factor of 1. The 80 points for Price are then worth three times more than the 80 points for Service when the overall score is calculated.

Customizing – Overall Criteria The overall score represents the general evaluation of a vendor. It is a combination of the scores the vendor has achieved for all the main criteria. You can compare different vendors on the basis of their overall scores without generating a detailed analysis of their evaluations (TA ME6B)

Customizing - Define Criteria (OMGI) The system calculates the overall score for a vendor from the main criteria scores. The main criteria available in the standard system are: ·        Price ·        Quality ·        Delivery ·        General service/support These main criteria serve as a basis for evaluating vendors from whom you procure materials. ·        Service This main criterion serves as a basis for evaluating those vendors you employ as external service providers. ·        Invoice This main criterion serves as a basis for evaluating vendors from whom you procure materials or services.

Customizing - Subcriterion Price Price level Price history Quality Goods receipt Quality audit Complaints/rejection level Delivery On-time delivery performance Quantity reliability Compliance with shipping instructions Confirmation date Invoice Quantity variance Price variance

Customizing - Subcriterion Price Level This subcriterion compares relationship of a vendor's price to the market price. If the vendor's price is lower than the market price, he/she receives a good score; if it is higher than the market price he/she is assigned a poor score. On the basis of the subcriterion Price Level you can compare a vendor's price to the current market price at a certain point in time. Price History This subcriterion compares the development of the vendor's price with the market price. On the basis of the subcriterion Price History, you can determine whether the vendor's price has increased or decreased over a certain period in comparison with changes in the market price over the same period. Goods Receipt This subcriterion is used to evaluate the quality of the material that the vendor delivers. Quality inspection takes place at the time of goods receipt. Quality Audit This subcriterion is used to evaluate the quality assurance system used by a company in manufacturing products.

Customizing - Subcriterion Complaints/Rejection Level This subcriterion is used to evaluate whether the materials delivered by the vendor are regularly found to be faulty subsequent to incoming inspection (for example, on the shop-floor) leading to additional expense and loss of time (due to loss of production, reworking etc.). The score (QM key quality figure) is calculated in QM Quality Management and the data passed on to MM Vendor Evaluation. This key quality figure is converted for use in the Vendor Evaluation scoring system. On-Time Delivery Performance This subcriterion is used to determine how precisely a vendor has adhered to the specified delivery dates. Quantity Reliability This subcriterion is used to determine whether a vendor has delivered the quantity specified in the purchase order.

Customizing - Subcriterion Compliance With Shipping Instructions This subcriterion is used to determine how precisely a vendor complies with your instructions for the shipping or packing of a material. Confirmation Date This subcriterion is used to determine whether a vendor adheres to a previously confirmed delivery date (that is, whether the goods are actually received on the date previously confirmed by the vendor). Quantity Variance With this criterion, you evaluate how exactly the quantity to be invoiced agrees with the quantity actually invoiced. Price Variance With this criterion, you evaluate how exactly the price to be invoiced agrees with the price actually invoiced.

Customizing - Define Purchasing Organization (OMGL) In this step, you define individual Vendor Evaluation System settings for each purchasing organization. All parameters must be maintained in order for the system to be able to compute scores. If, for example, you do not maintain any smoothing factors for the criteria "on-time delivery performance", "quantity reliability", and "compliance with shipping instructions", the system will not be able to compute the scores, otherwise when you try to do a new evaluation system issues an error message.

Customizing - Define Purchasing Organization (OMGL) APPLICABILITY PERIOD Period in calendar days within which data is to be taken into consideration for vendor evaluation purposes. Example: If you enter the value 150 here, the system will take into account data from the past 150 days for vendor evaluation purposes. Data that is more than 150 days old will not be included in the evaluation process. The applicability period is taken into consideration when the scores for the following criteria are computed: GR lots Complaints level Semi-automatic criteria The applicability period is not taken into consideration for the following criteria: Price level Price history

Customizing - Define Purchasing Organization (OMGL) BUSINESS VOLUME During the vendor evaluation process for quality, the system checks whether the costs associated with the faulty delivery exceed the maximum percentage of business volume defined in the Customizing system. Notice that this value here is a percent value, i.e. if you want 10% you should insert 10,0000 and not 0,1. STANDARD IZING VALUE FOR DELIVERY TIME VARIANCE Value in days that specifies how many days variance from the planned delivery date are to count as a 100% variance.

Customizing - Define Purchasing Organization (OMGL) SINGLE/SOLE SOURCE Determines how the price of a single or sole source of a material influences the scores for the subcriteria "Price level" and "Price history". It is only taken into account if the vendor is the only source for this material and no market price has been maintained for the material. There are two situations in which a vendor is the only source of a material: Single sourcing: This describes a situation in which your company has decided to procure exclusively from a certain source (e.g. for quality reasons), despite the fact that other sources exist. Sole sourcing: In this situation, there are no other sources capable of supplying the relevant material. The sole source situation is disadvantageous to you. In order that the system does not calculate a score for the price level and price history, you do not set the indicator.

Customizing - Define Purchasing Organization (OMGL) MINIMUM DELIVERY QUANTITY Indicates the percentage of the order quantity that counts as the minimum quantity to be delivered. If the minimum delivery quantity is not reached, the system does not determine a score for the goods receipt. MINIMUN DELIVERY PERCENTAGE AND STANDARDIZING VALUE FOE DELIVERY TIME VARIANCE When this indicator is set this information will be taken from the relevant fields in the material master record

Customizing - Define Purchasing Organization (OMGL) POINTS SCORES FOR THE AUTOMATIC CRITERIA Here the scores are defined regarding the percentage calculated during an evaluation. The relation between scores and percentage are always “up to”. This means that in the example below vendor get a score of 100 if the percentage is 0 and get a score of 95 if the percentage is between 0,1 and 2,0.

Transactions TRANSACTIONS: OMGC: Define Weighting keys for MC OMGI: Main Crit. with associated Subcrit. plus assignment of Scoring Meth. to be used. OMGL: Purchasing-organization-dependent settings OMGU: Maintain scope of list OMEK: Maintain scores for compliance with shipping instructions ME61 – Maintain Vendor Evaluation. ME63 – Calculate Scores for Semi-Automatic and Automatic Criteria. ME64 – Compare evaluations. OMO2 – Updating periods OMEK – Score for Shipping instruction (Purchasing -> Material master) OLI3 – Statistical setup MEKH – Market price QM03 – Quality notification ME13 – Display inforecords

Technical Data FUNCTION GROUP: MEL0. IMPORTANT FUNCTIONS:   MEL0. IMPORTANT FUNCTIONS: EVAL_SEMIAUTOMATIC_CRITERIA  EVAL_AUTOMATIC_CRITERIA_S013  EVAL_PRICELEVEL_CRITERIA  EVAL_PRICEHISTORY_CRITERIA 

Tables TABLES: ELBK- Header Data. Contains data as Weighting key, Overall score, etc.   ELBP - Main Criterion for Vendor Evaluation. Contain scores for main criteria and the individual scores for the associated subcriteria. Fields: HKRIT – Main criteria BEURT – score KRT01 to KRT20 - Scores for subcriterion    ELBM - Material-Related Item.

Tables TABLES… S013 - Statistics for Vendor Evaluation. Table that contains scores that are calculated during the on-line booking of some documents as for instance goods receipt. Contains information that related for the current period and the cumulative score. Important: The cumulative points scores of S013 are not entered in the VE evaluation record until re-evaluation is carried out. ELBK - Vendor Evaluation: Header Data GEWSL – weighting key GESBU- overall score ELPB – Main Criterion for Vendor Evaluation HKRIT – Main criteria BEURT – Score for the main criteria. KRT01 - score for the subcriteria 1. KRT02 – score for the subcriteria 2. When a score for the main or sub criteria has a value 0, this means that this criteria was not evaluated and not that the vendor has the worst possible result.

Customizing Tables T147 – Control table for vendor evaluation T147A – Definition for main criteria T147B – Text for main criteria T147C – Definition for Subcriteria T147D – Text for subcriteria T147E – Definition of weighting keys T147F – Description of weighting keys T147G – Main criteria T147H – Interval for delivery time statistics T147I – Definition of subcriteria for the main criteria T147J – Weighting keys T147K – Assignment: Percentage X Score T147L – Intervals for quantity reliability T147M – Definition of scope of list T147N – Text for scope of list T147O – Scope of List T027A - is the table for defining shipping instructions T027C - specifies the points scores for compliance.