Vendor Assessment Technique

Vendor Assessment may be defined as the assessment or evaluation of a prospective vendor to determine if they can effectively meet the obligations and needs of the business regarding a service or product. 

What is the Role of a BA in Vendor Assessment?

At some point, a business analyst may be required to assist the business with vendor assessment and selection. Some activities that the BA may be involved in include: 

1. Preparation of the Request For Information (RFI) and Request for Proposal (RFP) packages
2. Participating in a vendor’s proof of concept or helping with the first bid-or-buy resolution. 

It therefore goes without saying that a BA needs to have the essential knowledge and competencies needed for assessing and understanding vendor markets in order to support the business in identifying the suppliers to be invited for evaluation purposes. 

During the course of vendor assessment, the business analyst may be required to implement decision analysis tools to aid the organisation in selecting the best solutions. 

Vendor Assessment is considered a time-consuming activity especially when collecting evidence on multiple vendors. The criteria used for evaluating a supplier has been largely dominated by price. However, there are other numerous factors that need to be considered and these may include technical competence, vision, financial stability, capability, motivation, cultural compatibility, and the knowledge base of the vendor, to mention a few. Thus, the original focus on price as the major criterion is flawed. 

Organisations should not consider the ideology “cheapest is best”, when conducting vendor assessments. Crucially, a company should distinguish commercial evaluation from the technical in order to get the best of both worlds. The commercial and technical evaluations can thereafter be brought together to arrive at an informed decision. This implies that these two approaches apply due diligence in assessing the prospective vendor with regards to:

·      Availability

·      Resource capacity

·      Technical capability

·      Financial security

·      Availability of local support

·      Experience in the sector

·      Client testimony

·      Understanding of the geographic location

·      Understanding of business drivers and client’s business

·      Specific staffing and skill levels &

·      Compliance with standards

In most industries, it is useful to ascertain if vendors possess the right certification and experience to work in those sectors. The assessment of vendors may be as complex as setting up a tender board or committee to looking into vendor proposals or as simple as organising a presentation to assess the capabilities of the vendor. 

So, what are the benefits of vendor assessment?

• One of the main advantages of carrying out a successful vendor assessment is realised when an organisation lessens the risk of initiating an association with an inappropriate vendor, which in turn, leads to improved decision-making and effectiveness.
• Vendor assessment can lead to the identification of vendors with deep knowledge about a particular solution, initiative or methodology thereby enabling subsequent knowledge transfer to staff within the business.
• Vendor assessment offers the opportunity to learn about the solution that is to be deployed, the vendor and the market in general. Some of the key information that may come up during vendor assessment include licensing or pricing models, industry facts and figures, market dynamics/trends, the vendor’s market position and future plans, to mention a few.
• Vendor Assessment also offers the opportunity to investigate the commercial viability of the prospective vendor in terms of profit, turnover, debt position, and cash flow. 

Vendors may end up being involved in solution design, implementation and support of business solutions. Adequate care should be taken when selecting vendors so that the terms of engagement are beneficial to the business in both the long and short term. Though vendor assessments have been criticized for their subjectivity and susceptibility to risks as the partnership evolves, they can certainly help to reduce the possibility of outright failure and increase the chances of sustaining a long-term and mutually beneficial relationship with service providers.  

References

A Guide To The Business Analysis Body of Knowledge - Version 3

Hiles, A. (2002). Enterprise risk assessment and business impact analysis. Brookfield, Conn.: Rothstein Associates.

Hossenlopp, R., & Hass, K. (2008). Unearthing business requirements. Vienna, VA: Management Concepts.

Picture Attribution: “Characters Holding Yes No Signs Show Advice And Guidance” by Stuart Miles/Freedigitalphotos.net