MM Vendor evaluation

MM Vendor evaluation

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 time frames and appraise the quality of the work carried out.

Configuration

1. Define weighting keys

A weighting key is an identifier under which the weighting factors for a number of main criteria can be grouped together and saved. If you know that you will want to carry out an evaluation repeatedly with certain main criteria and certain weighting factors, you can save this combination under a weighting key. When you carry out the next vendor evaluation, just enter the relevant weighting key instead of entering a weighting factor for each individual criterion. The system then automatically sets all the weighting factors.

Go to SPRO-MM-Purchasing-vendor evaluation-Weighting keys

2. Define criteria

Main criteria: The main criteria form the basis for assessing the performance of a vendor. The system Calculates the vendor's overall score from the scores achieved for the main criteria.

Sub criteria: Sub criteria are the smallest units for which scores are awarded in Vendor Evaluation. The system calculates a score for the relevant higher-level main criterion based on the scores vendor receives for the various sub criteria.

Go to SPRO-MM-Purchasing-vendor evaluation-define criteria 

Now select the main criteria to which sub criteria is to be added and double click on sub criteria tab

Here enter the name of sub criteria and the scoring method

The following scoring methods exist:

manual               = key  '_'

semi-automatic   = key   1, C and D

Automatic          = key   2 to 9, A and B. 

3. Define scope list

In this step, you can define various types of list, each representing different main criteria or the same main criteria in a different order.

Go to SPRO-MM-Purchasing-vendor evaluation-define scope list

4. Maintain purchase organization data

In this step, you define individual Vendor Evaluation System settings for each purchasing organization.

1. Go to SPRO-MM-Purchasing-vendor evaluation- Maintain purchase organization data

Enter the purchasing organization number and other fields as mentioned below as per requirement

General parameters

Best score: Value representing the best score that a vendor can obtain in the evaluation.

Applicability period: Period in calendar days within which data is to be taken into consideration for vendor evaluation purposes.

Parameters for sub criteria

Price level

Single/sole source: Determines how the price of a single or sole source of a material influences the scores for the sub criteria "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.   

Complaints/reject level

ShareBusn volume%: Specifies the percentage for the business volume that will be taken into consideration when calculating the partial criterion 'complaint’. The business volume represents the limiting value for the lowest quality score of the partial criterion complaint.

This value is used in below formula:

The quality notifications with origin 'Q2' (notification of defects to vendor) form the basis for calculating the 'complaint sub criterion.

An estimate of the average nonconformity costs caused by a quality notification can be stored for each quality notification type in the Customizing application.

The nonconformity costs calculated in this way are in proportion to the turnover generated with the vendor. The share of the turnover which is to be used for the calculation can be be defined by means of a factor. The share of the turnover defines the limit value for the nonconformity costs which, if exceeded, produces a minimum quality score for the 'Complaint' criterion.

The 'Complaint' sub criterion is calculated using the following formula: 

                                                              Factor * T - nonconf. costs

QSc = QScmin + ( QScmax - QScmin ) * ---------------------------------- 

                                                              Factor * T 

QScmin  =  Lower quality score limit from the QSS table

QScmax  =  Maximum quality score from the QSS table 

Factor  =  Relevant turnover share for quality score calculation

T       =  Vendor turnover for the selected period and purchasing organization 

Nonconf. Costs = Estimated nonconformity costs * no. of notifications

Example of evaluation of 'Complaint' criterion:

QScmin  =    1

QScmax  =  100

Estimated nonconformity costs per quality notification   =  500.00

Factor for relevant turnover share =  0.1 

No. of notifications   =  20

Turnover              =  1 000 000.00 

                                                  0.1 * 1 000 000.00 - ( 20 * 500.00)

QSccomplaint  =  1 + ( 100 - 1 ) * ---------------------------------                                              

                                                  0.1 * 1 000 000.00

Quality Audits

Average of all lots: If you set the indicator, the system calculates the average from the quality audits of all plants that took place within the relevant period defined under "applicability period”. If you do not set the indicator, the system applies only the most recent audit for evaluation purposes - irrespective of when it took place (i.e. the score for the most recent audit is simultaneously the score for the sub criterion).

On time delivery

• Standard delivery date variance: Value in days that specifies how many days variance from the planned delivery date are to count as a 100% variance.\
• Minimum delivery quantity in percentage: Indicates the percentage of the order quantity that counts as the minimum quantity to be delivered.
• Min. Deliv. Qty/Std Value Deliv. Time Variance: Indicator that determines whether the default minimum delivery percentage and the standardizing value for delivery time variance are taken from the material master record or from the field’s Minimum delivery percentage and Standardizing value for delivery time variance.

Smoothing factors

Timeliness/service:  A value enabling the user to determine the extent to which a current (new) value used in a calculation influences the result. The smoothing factor can have a value between 0 und 1.A high smoothing factor causes the result to be changed significantly, whereas a low one makes little difference. If you have defined a smoothing factor of 0.1, the individual score for a new goods receipt counts as a tenth of the score for the sub criterion. The previous score counts as nine tenths of the new score for the sub criterion. The formula is as follows:

Previous score x (1 - 0.1) + New score x 0.1

For example, the previous score was 80 points; the new individual score is 20. The formula is then:

80 x 0.9 + 20 x 0.1 = 74

The new score for the sub criterion based on this material is 74 points. Same formula applies for quantity reliability and shipping instructions      

2. Now go back and double click on main criteria option

Here select the required main criteria for vendor evaluation

3.  Now select the main criteria and double click on sub criteria option to define sub criteria

Here enter the sub criteria and enter the weighting

4. Now go back and double click on weighting to enter the weighting of main criteria

Here enter the weighting and weighting key which is created previously

5. Now double click on point scores for automatic criteria

Here assign the score to the percentage for automatic vendor evaluation and save

Automatic vendor evaluation

1. To do automatic vendor evaluation, enter scoring method of sub criteria as 2,3,4,5,6,7,8,9,A,B,G according to requirement for example for sub criteria Price level enter scoring method as 4 i.e. Automatic determination from purchase statistics

Go to SPRO-MM-Purchasing-vendor evaluation-define criteria

2. Now go to Tcode ME61

Here enter purchase organization and vendor

Then go to edit and select auto new evaluation, system will carry out automatic evaluation of vender

Now save the result

3. Now got to Tcode ME65 for vendor comparison

Enter the purchasing organization and vendor and execute

Semi-automatic vendor evaluation

This method allows the score for a sub criterion to be calculated from a broader base of data. Scores obtained in this way are more meaningful and objective.

1. To do semi-automatic vendor evaluation, enter scoring method of sub criteria as 1,C and D according to requirement for example for sub criteria price difference enter scoring method as 1 i.e. Semiautomatic Determination from Material-Vendor Evaluation

Go to SPRO-MM-Purchasing-vendor evaluation-define criteria

2. Now go to purchase info record in Tcode ME12 and enter material, vendor, purchase organization and plant

Go to purchasing data screen, then go to extras and select vendor evaluation

Here enter the score manually for semi-automatic criteria and save

3. Now while carrying out vendor evaluation in Tcode ME61, system will pick the score of semi- automatic criteria from info record, rest of the procedure is same as automatic vendor evaluation

Manual vendor evaluation

1. To do manual vendor evaluation, do not enter anything in scoring method of sub criteria

2. Now go to Tcode ME61 for vendor evaluation, here select the required main criteria and select main criteria tab

3. Here enter the score for manual sub criteria in this case price difference and save

Rest of the procedure is as per automatic vendor evaluation method 

Sample of vendor evaluation calculation 

1. Scoring of sub criteria

2. Scoring for the main criteria

3. Overall score for a product

Overall score of product:  20.75 + 67.5=88.25~89