The 10C’s of Supplier Evaluation is a framework developed by Dr Ray Carter to evaluate the suitability of suppliers. When Carter first released the questions there were only 7C’s but this has since grown by three, it is used to compare suppliers and evaluate who best suits an organisation’s immediate needs and identifies areas of risk that are presented by suppliers.
- Cash Reserves
- Corporate Social Responsibility
Using the 10C’s can help organisations to evaluate and compare potential suppliers in an effort to improve supply chain management and make procurement more efficient. This model is effective because it allows us to consider businesses of all sizes, instead of going directly to the larger corporate entities who often have more complex, inefficient processes and tall barriers to entry for new entrepreneurs and startups who may not be able to afford the minimum order quantities (MOQ), for example, as some suppliers demand. For example, a startup in the retail space may wish to buy direct from manufacturer understanding they will save money by bypassing a wholesaler, however, most suppliers have a MOQ which may be out of reach for the average UK start-up company meaning they have no choice but to consider wholesalers.
A common strategy for new e-commerce businesses is to undergo retail arbitrage strategies, where they purchase from stores at RRP because they maybe can’t afford, don’t have the resources, appetite for risk, commitment or access to wholesalers where they can buy stock in bulk for resale and the 10C’s can also be effectively applied here.
Understanding the 10C’s
The 10C’s represent considerations organisations and procurement teams should bear in mind when evaluating competitors. It isn’t just about who has the stock/service you require and who can deliver it the fastest. Instead, numerous factors are considered:
Suppliers need to have the skills and resources needed to adequately meet your needs and expectations. Considering a supplier’s competence through assessing them against the other components of the model as well as the needs defined by your organisation is the first step in deciding whether a supplier would be suitable. By understanding the supplier’s competence, organisations purchasing from the supplier can understand the risks and limitations of dealing with a specific supplier, for example, whilst they may meet many key needs of an organisation, it is unlikely they will meet all the needs of an organisation – understanding which needs are fulfilled then allows us to consider other suppliers who will fill the remaining needs.
Suppliers need to have the correct amount of equipment, staff and materials to meet the needs of an organisation evaluating suppliers. Without optimal capacity, the supplier may struggle to meet those needs resulting in business disruption further down the line if, for example, the web hosts you’re considering cannot offer a fast enough load speed for your website resulting in cart abandonment as customers because frustrated with long wait times or if production is halted because a supplier cannot supply enough raw materials in time to fulfil customer orders resulting in refund requests.
Suppliers may not always have enough capacity to serve your organisation, this is often the case as organisations grow larger than their suppliers and you may find, over time, you require more than one supplier partially fulfiling the same needs just to meet the capacity of your own organisation.
Suppliers have to be committed to good practices, whether this is operating below a minimum order defect rate or taking steps to remain compliant with government legislation and industry standards. If the supplier isn’t committed to abiding by legislation, for example, your organisation could inadvertently break the law by supplying unlawful products. Heinz, Pot Noodle, Colmans and Bird’s Eye, for example, found themselves issuing a product safety recall after it was found their supplier had used illegal quantities of a carcinogenic red food dye called Sudan 1 in the Worcester Sauce used in many of their core product offerings. The safety recall was the largest of its kind at the time.
More recently, Heinz was forced to issue another recall after jars of baby food were found to have metal fragments inside after it was realised a production line machine breakdown had caused a metal component to fracture and contaminate the food.
It is clear a commitment to quality is important for any business and if businesses aren’t committed to high-quality performance, it is unlikely they would issue product safety recalls and for suppliers, this could have knock-on effects to the product quality (and legal liabilities) of the goods/services offered by your organisation.
Examples including the Volkswagen emissions scandal highlight the importance of commitment to good practices and acting within the confines of the law in an ethical manner. The scandal erupted calls to boycott the car manufacturer due to their lack of commitment to good industry practices where software in their car deliberately tricked quality surveyors into believing the car produced fewer carbon emissions by detecting when it was being reviewed under test conditions whilst the real-world data showed the emissions were significantly higher.
Suppliers need to have control over their own processes to ensure consistent performance. If the supplier relies too heavily on their own suppliers, it is likely they will be less reliable than those who don’t. Organisations will often undertake vertical expansion to take control of their production and supply chains minimising the risks associated with relying on suppliers but vertical integration is often high risk and expensive (though it offers cost-saving benefits down the line) so for startups, this is often out of the realm of possibility but when it comes to choosing a supplier, finding one who can offer end-to-end solutions to your needs as a result of their own vertical expansion could be beneficial.
Money makes the world go round and without adequate financial reserves, is the supplier likely to be able to keep pace with your needs and offer a consistent supply as you need? What are the risks of their money running out forcing them to close, will they be easily replaced? These are important considerations to make when it comes to choosing a supplier, especially if changing supplier could be a complex, long, drawn-out process. Cash-rich businesses have better longevity in times of economic downturn where they can sustain losses for a period before having to worry about making redundancies or cutting costs.
It is important, therefore, to ensure you maintain a diverse range of suppliers, just in case one goes under, wherever possible. Businesses including Videscape found this out the hard way when their Google Adsense account was shut down unexpectedly eliminating their only source of revenue, effectively making them worthless overnight. Tom Oswald, the founder and CEO of Videscape, didn’t make the same mistake again by relying on one individual advertising partner as their source of revenue in their next venture, ClickASnap.
As we know, the whole purpose of business in most cases is to generate profit so with that being said, an important consideration is how much the supplier’s products costs and how these costs compare to their competitors. Many suppliers offer quantity discounts which could be appealing but for smaller businesses who can’t afford larger quantities, even at the discounted rate, will not realise the value in selecting a supplier based on quantity discounts.
When it comes to cost, it is often expected that lower cost results in lower quality, this is especially prevalent in the consumer market but it isn’t often the case. Much of the time, organisations have to increase the purchase cost of their products to offset the expenses of marketing amongst other things, so organisations with a smaller marketing budget, keeping to example, could offer the same quality product for a much lower price than a competitor with a larger advertising budget. So, low cost doesn’t always mean low quality but sometimes it may do so costs have to be considered regardless, if two competing suppliers offer the same products at very different costs it is important to question what benefits, if any, one offers over the other.
The need for consistency is key for any procurement team tasked with sourcing resourcing for regular processes. If a supplier doesn’t have processes and procedures in place to ensure a consistent supply then you’ll find yourself needing several suppliers doing the same job, spending more time and resources juggling suppliers trying to accommodate their inconsistencies. The better option would be to just sack inconsistent suppliers where possible in favour of suppliers who adequately and consistently meet the needs of the organisation.
Finding consistency isn’t always easy, though, especially where goods are made by hand, including handmade decorative glass ornaments where ensuring each product is a near carbon copy of one another will be almost impossible.
–Does the supplier share the same cultural values as your organisation? Is it important that the supplier shares the same values and attitudes to help prevent any tensions in the future relationship? A good partnership usually involves two companies observing the same values. That’s why it’s important to consider the supplier’s corporate culture.
Corporate Social Responsibility
Dr Ray Carter labelled this element as “clean” in his 10C’s but with the emphasis of ethics and sustainability, it is felt more appropriate to upgrade this consideration to encompass all parts of corporate social responsibility (CSR). Suppliers should have good sustainability policies where possible as this offers benefits to your organisation in the way of improved public perception. Brands like the BodyShop advertise themselves as “cruelty-free” meaning their products are not tested on animals and remain largely ethical, however, eyebrows are raised when considering their use of ingredients including soybean which has a significant carbon footprint in the manufacturer and delivery of the product overseas, soybean is incredibly difficult to grow locally in the UK so we expect it is imported – to what extent soybean farms impact the ecological environment they operate in is unknown. Further, Bodyshop uses certain colourants including Acid Red 33 which is known to be highly toxic to mammalian household pets, including dogs, cats and mice in relatively low quantities and the use of these kinds of ingredients may be surprising to the average consumer.
For organisations like Bodyshop, albeit the use of questionable ingredients, they would demand their suppliers have similar ethics and share the same CSR values because if they don’t, Bodyshop’s tagline becomes redundant; it would be unlawful under the advertising codes to claim their products are cruelty-free knowing they have been tested on animals. Speaking of which, the Body Shop came under fire when L’Oreal acquired the brand for £625m in 2006 because L’Oreal do engage in animal testing and this is the polar opposite of the values held by the Bodyshop however, it is a misnomer because the only animal testing L’Oreal undertake is in China, which is a legal requirement of cosmetic products sold in China. Ethically, customers would expect L’Oreal to not engage with the Chinese market but not doing so would be detrimental to the longevity of the brand. The Bodyshop does not sell their products in China but if they did, they’d also be legally required to engage in animal testing.
The calls to boycott the Bodyshop after the acquisition shows the focus consumers place on CSR and ethical practices. Primark have come under similar fire for their lack of ethics relating to the working conditions of the staff working in factories employed by Primark to manufacture their products which resulted in Primark taking steps to improve their procurement processes and defuse consumer tensions over reports of Primark sourcing garments made in forced labour camps under slave conditions.
How you will communicate with suppliers is also an essential consideration. Do they have multiple channels you can use to get hold of them or is everything done via online contact forms with limited access to speak to a person over the phone? In times of emergency such as severe shortages of raw materials, will you be able to communicate with the supplier in good time to effect quick mobilisation of resources to decrease the risk of business interruption?
Good communication, it goes without saying, is critical in all aspects of business whether you’re dealing with suppliers, customers or staff. Poor communication results in incorrectly fulfilled orders whilst good communication can improve relationships across the board by ensuring everyone is on the same page.
If an organisation has limited contact methods, such as by email or post only (as is often the case with overseas manufacturers), it will slow down the convenience and timeliness of orders and fulfilment. In fast-paced markets, the consequence of this could result in your organisation failing to deliver to your customers on time whilst you wait for resources to produce a product or offer a service.
How to Apply the 10C’s
When applying the 10C’s, it is important first for organisations to establish their own needs. Each supplier(s) will fulfil a different need, whether it’s the supply of raw materials for manufacturing and production or web hosting services for an online store through to the banks or other funding sources you may approach and more.
Understanding an organisation’s needs allows for a thorough investigative comparison between suppliers as not all suppliers are created equally. There is a Goldilocks Effect when it comes to selecting the right supplier as there is in selecting the right product to sell, some will be insufficient in their offering, maybe fulfilling one or two of several needs whilst others will be far too complex in their offering, such as having strict rules as to how they operate as a supplier (including MOQs, membership fees, etc) and the suppliers we really want to work with are those who are ‘juuuust right!’ – these suppliers may not adequately fill every need but they will certainly be a good contender for an Approved Supplier List (ASL).
An ASL is an important reference tool as it enables business owners to monitor their supplier relationships and more importantly offers consistency throughout the procurement processes the organisation already has in place. For example, you may have a specific supplier for office stationery who supplies your printer ink – without documenting who this supplier is via the ASL, new members of the procurement/supply chain management team may inadvertently go to their competitor for the same supplies which could alienate the approved supplier should they find out. It may also have consequences if the organisation is contractually bound to purchase supplies exclusively from them.
When companies deal with a limited number of suppliers, as is the case for most startups, it will usually be impossible to award top marks for every consideration and a strict policy on only dealing with suppliers who excel in all 10 considerations of the 10C’s model could quickly eliminate all of your suppliers. Therefore, it is critical to extrapolate the most important considerations relative to your needs. Tools including Decision Matrix Analysis can be used to score each supplier against each of the 10C’s which can then be compared objectively between suppliers to highlight the most suitable suppliers relative to the most important needs.
Carter, R. (1995) ‘The Seven Cs of Effective Supplier Evaluation,’ Purchasing and Supply Management, April 1995, 44-45.