tips for vendor evaluation

[Blog] Bonus tips: Approach to evaluate a vendor in totality

How to evaluate a serialization and aggregation vendor?


How to evaluate which is the best vendor for your business?

For what to watch out for during the vendor assessment?

How to evaluate a vendor in totality?


Find the answers to these questions in our Bonus Tips Paper


engineering assessment icon  Engineering assessment


Each manufacturing base, its production lines and requirements are unique to the customer. Accordingly, if you want to assess the capacity and capabilities of the provider you are negotiating with, you can familiarize him with the specifics of your business model and then ask him for multiple solution scenarios, considering the costs and risk. With this “experiment”, firstly, you will get a real sample solution created specifically for your business, and on the other hand at least 50 percent of the vendors shall be screened. The benefits from the engineering assessment are double – take the full potential from them.



  Facility’ visit and vendor audit


1,2,3 – Action. This is the moment when you see the full potential of the systems and processes that your future vendor has and will provide to you – a core part of the purchase. The plant audit is essential for the large multi-location projects – this is not just a commercial in LinkedIn or Zoom meeting, you see how the vendor works in reality. The facility visit can be a game changer – you can recognize the risks and prevent future costs for your company, or the opposite – can make your point and confirm your opinion about the positive impact that your future partner will have on your business.



  Reference check


The due diligence of the potential future vendor is mandatory – visit different customers and check the diversity of the implemented solutions. This will help you to make an informed decision – you will have the opportunity to meet people with similar challenges and goals as you, and to see what is their experience with the vendor`s technology – check the reliability, flexibility, adaptability of the solution. The reference check can give important information about the vendor`s background history of collaborations and how they went – useful in the process of finding the best way of managing relations with the new vendor.



Techno-commercial evaluation icon  Techno-commercial evaluation (based on TCO)


Track and trace combines various technologies. The evaluation of the process is compound, so we suggest using a tool for comprehensive commercial evaluation – TCO.


The TCO: What is often seen is just a part of the reality

Firstly, the TCO (total cost of ownership) is an analysis that places a single value on the complete life cycle of a capital purchase and as important looks at the hidden costs beyond the price. There are not only purchase prices. Indeed, also exist direct and indirect costs. Total cost of ownership (TCO) aggregates both direct and indirect costs. It considers the total cost of a decision by evaluating factors like service,  maintenance, and training costs.



   Direct cost


Something we are used to find in the service provider (vendor) quote. It includes the  proposed hardware, software, SaaS, integration, validation, documentation and FAT/SAT. For the direct cost is typical to be specified via budget.


Example: Direct costs in case of an IT investment – Purchasing costs of hardware or the necessary software; Costs resulting from maintenance and service contracts; Training programs for staff; Ect.



  Indirect costs


Expenses not directly linked to the investment. This is the cost which involves the internal resources of the organization. They have a big impact on the workflow and can cause a misfunction.


Example:  Indirect costs in case of an IT investment – Server or software downtime; Improvable functionalities and user experience – cost cuts in training; User-driven insufficiencies; Ect.



  Hidden costs


Hidden costs are related to the purchase, set-up, switching approach, infrastructure support, electronic security, rejection and rework, product recalls, line breakdown/ shutdown, line efficiency drop, etc.


SoftGroup Hints – TCO Benefits:

  Consider direct and indirect costs to measure the true cost

  Guidance tool for optimizing direct and indirect costs

  ROI and ROTI evaluation

  Predict risks and improve long-term financial performance


А customer share with us – “If the chosen solution saves my four days of production shutdown annually, in spite of the high capital investment, the ROI is achieved in a year.”. We all know what means to us downtime, or if there is a high rejection and rework rate.