Carter’s 10 Cs Of Supplier Evaluation: Evaluating Potential Suppliers
I want you to imagine for a minute that your organization has won a huge tender to produce some products for one of your biggest clients.
As the procurement executive, you are in charge of picking suppliers to provide your organization with the materials needed during production.
The production kicks off well, but midway through the production process, one of the suppliers is unable to deliver the materials on time and in the required quantities.
Production drags, your organization is unable to meet the deadlines, and after the project, the client drops your organization and moves to one of your competitors.
All because you made one bad decision during the supplier selection process.
This shows how important it is to make the right decision when choosing a supplier for any part of your organization.
Get the decision right and you get to enjoy a smooth sailing and build long term relationships with your suppliers. Get the decision wrong, and the results could be disastrous.
Undoing the disastrous outcome might take tremendous time and effort, not to mention the losses that might arise due to the mistake.
In some cases, the results might be permanent, such as losing an important client to a competitor or damaging the reputation of your organization.
A lot of people assume that supplier selection is all about finding the supplier who provides what you need at a low price.
However, there is a lot more that is involved in supplier selection.
What good is a low price if the supplier is going to supply low quality products? What good is a low price or high quality products if they are going to deliver the products late, or if they won’t be able to meet your needs during periods of increased demand?
Before evaluating suppliers, it is important to define the needs of the organization, and then define what qualifications a supplier needs to have in order to be able to meet these needs.
Any mismatch between your organization’s needs and what a supplier can offer will only lead to problems, such as additional costs, unexpected delays, lost clients, or a damaged reputation.
While organization needs will differ from one organization to the next, there is a model that procurement officers, regardless of the organization, can use in the supplier evaluation stage to minimize the chances of making the wrong decision when choosing a supplier.
This model is known as Carter’s 10 Cs.
Below, we are going to take a look at the 10 criteria that this model suggests should be used to evaluate suppliers.
Before we get to the model, however, it is worth noting that the supplier evaluation process consists of two stages: supplier prequalification and supplier performance evaluation.
Supplier prequalification is all about ensuring that any suppliers you get to work with have the potential to fulfill your needs, while supplier performance evaluation is all about evaluating whether the supplier who has been awarded the contract is actually meeting the terms of the contract.
Carter’s 10 Cs method is only applicable in the prequalification stage.
WHAT ARE CARTER’S 10 CS?
The 10 Cs refer to ten criteria that are to be used to assess the aptness of a potential supplier. Carter first proposed this model in an article published in Journal of Purchasing and Supply Management in 1995.
Originally, Carter proposed 7 criteria for evaluating suppliers. He later added three more criteria to his model, resulting in the 10 Cs.
It’s good to note that Carter’s 10 Cs are not just a checklist. Instead, they are a model that allows you to perform a comprehensive evaluation of potential suppliers.
It’s not just about making sure that a potential supplier ticks off these 10 criteria, it’s about finding suppliers who excel in each of these 10 criteria.
Below, let’s take a deeper look into each of the 10 Cs of Carter’s supplier evaluation model.
The first criteria of evaluating a supplier is to check their level of competence.
Here, you will need to thoroughly assess the capabilities of the supplier compared to the needs of your organization. Does the supplier have people with the right skills to provide what you need? Do they have the right equipment to provide what you need?
Here, it is quite easy for a supplier to misrepresent their competence and falsely claim that they have the capability to meet your organization’s needs.
Therefore, you should not take their word at face value. Instead, you should look for hard evidence to prove that they are actually competent.
A good way to do this is to talk to other customers who have worked with the supplier. How was their experience? How happy and satisfied were they with the service provided by the supplier? Did they encounter any challenges working with this supplier? Are there clients who have dropped this supplier and moved to another? If yes, why did they move from this supplier?
To ensure that the information you are gathering is relevant to your organization, you should look for previous customers who have needs and values that are very similar to those of your organization.
A supplier might have the competence to provide you with what you need, but do they have enough capacity to meet your requirements?
Therefore, during your evaluation, talk to the supplier and understand their production or supply capacity, as well as how they plan to deal with fluctuations in supply or demand.
For instance, if your organization needs 10,000 units of product X every month but the supplier can only produce 7000 units in a month, then they do not have enough capacity to meet your needs.
Even if the supplier is capable of producing the 10,000 units you need every month, what happens if you need 13,000 units in one month due to a surge in demand? Do they have the ability to handle such fluctuations in demand? How quickly can they respond to such fluctuations?
When evaluating a supplier’s capacity to meet your requirements, you need to look at their resources. Do they have enough staff to meet your needs? Do they have enough materials, equipment and storage?
Ideally, you should go for a supplier whose capacity is way beyond your requirements.
Remember, you are not their only client, and their commitments to other clients could have an impact on their ability to meet your organization’s needs. For instance, let’s assume that you need 10,000 units of a product in a month, and the client has capacity to produce 15,000 units of the product in a month.
On the surface, it seems like this client has enough capacity.
However, let’s say they have two other clients who need 3,000 and 2,000 units of the same product in a month.
This means that in the event your demand increases, they won’t be able to meet your requirements. You need to take such matters into account before prequalifying a supplier.
Quality is one of the most important things you need to consider when procuring products or services.
A good supplier needs to be committed to providing high quality products, as well as maintaining a high quality of service and performance.
Once again, when evaluating a potential supplier for commitment, don’t just take their word for it.
Aside from their commitment to quality, you also need the supplier to demonstrate that they will remain committed to you for the entire duration during which you hope to work together.
This is especially important if you intend to maintain a long term relationship with the supplier.
A good way to evaluate the commitment of the supplier is to talk to other customers who have had long term relationships with the supplier.
A good supplier needs to have a high level of control over their procedures, processes, policies, and supply chain.
Their level of control determines their ability to deliver products and services reliably and consistently.
This is especially important in situations where the supplier relies on resources that are under the control of another organization.
For instance, if the supplier outsources some of their functions to another organization, how will they ensure that this organization handles this function reliably?
When evaluating the level of control a supplier has, it is also important to take into account a supplier’s ability to remain reliable and consistent in case things don’t go according to plan.
Do they have in place strategies and mechanisms to mitigate and manage risk?
For instance, the government might pass new laws affecting how you produce your products, or how the supplier produces their products.
Will the supplier be able to handle such changes, or will you be forced to find another supplier?
Ideally, you want a supplier who is capable of handling such changes with minimal negative impact to your organization.
A good supplier should also be financially strong, with sufficient financial reserves.
In most cases, businesses expect suppliers to deliver required items on a regular basis, but then payments are usually made after a pre-specified duration, such as every 30, 60, or 90 days.
Does the supplier have enough working capital to continue supplying your organization till the next payment, or will they be unable to continue supplying if a payment is held for 60 or 90 days?
It’s also good to note that the economy is full of ups and downs.
Choosing a financially strong supplier means that you can continue to rely on them even during periods of economic turmoil.
If your chosen supplier is financially overextended, they won’t be able to meet your requirements during an economic downturn, which means you will be forced to start looking for another supplier if trouble hits.
When it comes to evaluating a supplier, cost is quite important. It is actually one of the most popular criteria for evaluating potential suppliers.
One of your responsibilities as a procurement executive is to save your organization money, and understandably, you don’t want to overpay for products or services.
It is therefore important to compare the cost of procuring products or services from this supplier compared to other suppliers.
If the cost is excessively high, you might want to consider another supplier. If the cost is too low, you might be getting a raw deal somewhere else.
While cost is an important aspect of supplier evaluation, you should never look at cost in isolation.
The suitability of a supplier’s cost depends on other factors, such as the supplier’s commitment to quality, their level of control, or their financial health.
If low cost means getting low quality products or service, it is far much better to go with a more expensive supplier who delivers high quality products and service.
Similarly, low cost is of no use if it means consistently delayed delivery, or if means you have to work with a supplier with poor financial health.
This is why cost is placed at the middle of the Carter’s 10 Cs, rather than at the top – because it is dependent on other factors. Relying on cost alone could lead to disastrous results.
Imagine a supplier who supplies a very high level of service one day, provides a poor level of service with the next order, and then reverts to the high level of service with the third order.
Would you want to use such a supplier? Probably not, because you don’t know what to expect with them. In other words, they lack consistency.
A good supplier needs to be able to deliver high quality goods and services and a high level of performance, not just occasionally, but consistently.
Of course, it is not possible for a supplier to be perfect all the time.
However, they need to have in place measures, procedures, and strategies to ensure consistency.
In addition to checking the measures they have in place to ensure consistency, you should also check that they have a strong track record. If possible, you should also request for a test product or demonstration.
If you want good business relationships with your suppliers, you should go for suppliers who have workplace values that are aligned with those of your organization.
Having similar values means that the both of you will be focused on the same things, and therefore, they are unlikely to disappoint you or lead to unwanted tensions.
For instance, if the most important value in your organization is quality, while the most important value for your supplier is on-time delivery, this means that they might sometimes compromise on quality in order to meet deadlines, which is not something you want.
To ensure you have the same values, you should take a look at the supplier’s corporate culture and check whether it is aligned with that of your organization.
Ideally, some of the values you want in a supplier include excellence, commitment to quality, speed, reliability, trustworthiness, and innovation.
For instance, you can check if the supplier has received any industry recognition or awards due to their cultural excellence.
This criteria refers to the supplier’s compliance with environmental regulations and best practices, as well as their commitment to sustainability.
Does the supplier make any efforts to maintain compliance with environmental regulations? What is the supplier’s environmental footprint? Do they have a sustainability policy? Have they won any green credentials or accolades? Is the supplier known for ethical business practices? Are they committed to Corporate Social Responsibility? How does the supplier treat its employees?
At a time when clients and investors are drawn to businesses that show a commitment to sustainability and ethical business, you don’t want your organization to gain a bad reputation for working with suppliers that do not value sustainability and ethical business practices.
Communication is a very important part of the client-supplier relationship. You need to have a clear idea if the supplier’s communication practices are aligned with those of your organization, and that you will be able to quickly reach the supplier if need be.
When evaluating a supplier for communication, there are several things you need to look at. First, you need to determine how the supplier intends to keep in touch with you. What are their proposed communication tools and methods? Are they aligned with your preferred communication tools and methods?
For instance, does the supplier require you to communicate through their collaborative hub while you prefer communicating via email? Are they flexible enough to switch to your preferred method of communication, or will you have to stick to their proposed method?
You also need to find out who your contact person is.
Having a designated contact person means you have one person who is on top of all your transactions with the supplier, rather than being thrown from one person to the next with every transaction and every piece of communication.
Finally, you also need to find out how communication will be handled in case things do not go according to plan.
For instance, if supply is disrupted, how will the supplier notify you of this disruption? How quickly will the supplier notify you about the disruption?
If you need to escalate the problem, how easy is it for you to get in touch with senior people at the firm?
Generally, the easier and more convenient it is to communicate with a supplier, the more likely you are to have an easy time dealing with the supplier.
After all, you don’t want to deal with the headache of trying to reach a non-responsive supplier when they have already botched an order.
HOW TO USE CARTER’S 10 CS
Carter’s 10 Cs of supplier evaluation is a great way of improving your organization’s supply chain management.
It provides you with a reliable method of assessing potential suppliers based on areas that are important to your organization.
It also levels the playing field and allows you to evaluate and select suppliers based on the same aspects.
Evaluating potential suppliers on the 10 criteria will give you a much better understanding of a supplier’s ability to meet your organization’s needs compared to any other supplier evaluation model.
If you are working with a small pool of suppliers, it might be difficult for you to find a supplier who excels in all the 10 Cs. In this case, your best option is to score the supplier’s performance in each of the 10 Cs using a grid-based approach, such as Decision Matrix Analysis.
From there, you can select suppliers who excel in criteria that are most important to your organization.
At the same time, you should also be careful about the criteria where the supplier is weak. Weakness in some core areas could make a relationship with the supplier impossible, even if they excel in other areas that you consider important to your organization.
For instance, if a supplier scores poorly in competency or capacity, it might not make sense to go ahead with them even though they scored highly in areas such as cost, communication, clean or cash.
Finally, you can also use Carter’s 10 Cs as a negotiation tool to help you get better prices.
If a supplier has is weak in one area, you can use this as a basis for asking for a lower price, especially if this weakness could pose a risk in your firm.
For instance, if a supplier is weak in control, this might require your organization to take some action to minimize risk resulting from the supplier’s poor control over their processes or supply chain. You can use this to negotiate for better prices.
Supplier evaluation is a very important of the procurement process.
It allows you to build long term, mutually beneficial relationships with suppliers and prevents you from making costly mistakes that might require lots of time and effort to rectify.
Carter’s 10 Cs of supplier evaluation provide you with an effective method for assessing a potential supplier’s ability to meet the supply needs of your organization and therefore keep your customers satisfied.