Fleet Vendor Analysis
Vendor analysis is the assessment of current or prospective suppliers with respect to their:
- Financial strength
- Vendor’s business model
- Capacity to supply the appropriate products and services
- Capabilities – what it can and cannot do or provide
- Turnover and profit levels
- Markups, price list and discounts
- Reliability and quality
- Payment terms
- Ability to implement a solution if services are being purchased
- Availability of experienced staff
It is undertaken when a company is consolidating its existing suppliers, choosing new vendors or analyzing the capabilities of the current suppliers.
It may also be undertaken when a company is searching among potential suppliers of a possible solution to a business problem. For example, the company may be seeking to consolidate its accounting, inventory and purchasing systems using one software system.
In the current financial environment, it is imperative to cut costs wherever possible. A vendor analysis which includes a review of the reliability and stability of a vendor as well as the cost of doing business with them is a suitable way to minimize purchasing costs.
The company would first undertake a vendor analysis to ascertain which large companies provide Enterprise Resource Planning (ERP) software. The resulting report would look at the appropriate companies and also analyze the functions and benefits of each ERP package. This would allow the company to ascertain a short list of appropriate vendors with whom to discuss their requirements.
Some companies purchase from a large number of suppliers and they need to undertake a periodic series of vendor analysis. They seek to understand which of their suppliers are contributing the most to their profit and conversely which are costing more to manage than they are contributing. This vendor analysis thus becomes a cost benefit analysis.
Thus the performance of the vendor coupled with their direct and indirect benefits is compared to the physical cost of doing business with them. These costs would include such matters as:
- Difficult delivery times that require extra staffing to manage
- Early requests for invoice payment
- Unreliability and frequent short and damaged deliveries
The company would also take the opportunity to review the financials of the vendor, to evaluate the stability of their business.