Get Optimal Service Performance from Vendors Using Vendor Evaluation for External Services

  • by Patrick Imhen, Business Analyst and Senior SAP MM/SD/PM Functional Consultant, ZOCODE Limited
  • March 13, 2017
Learn how the Vendor Evaluation functionality for external service vendor appraisal can give optimal service delivery. This functionality helps organizations mitigate poor service delivery and uncover and remove unnecessary costs.
Learning Objectives

By reading this article, you will learn:

  • How to configure the Vendor Evaluation settings for external service vendor appraisal in an SAP ERP system
  • How to uncover and eliminate hidden costs for external services
  • How the scores are derived and the end-to-end computation process
  • How to set up the service entry sheet for Vendor Evaluation
  • How to set up the Purchasing Info Record for Vendor Evaluation
Key Concept
It is important for an organization to measure from time to time the performance of vendors that provide external services. This measurement provides ample insight on possible risks, quality of service delivery, timeliness of service delivery, and service cost. External service vendor evaluation is a major process in the Vendor Evaluation component in SAP ERP Purchasing (MM-PUR).

The external service process is a vital part of the procurement process in SAP ERP materials management (MM). To achieve a holistic high performance of the procurement business process, there has to be ample visibility into all the operations or business relationships with vendors, including those who provide external services.

Some external services include training of personnel, outsourced jobs for electrical installation or repairs, routine maintenance and repair of machines, outsourced physical inventory counting jobs, and outsourced delivery jobs. Procuring services like these attract costs and if not well managed they can be an avenue for unnecessary expenses.

For instance, a poor electrical wire installation can cause a fire outbreak in the office or warehouse that can result in the loss of life and property. A continuous unchecked act of delayed repairs of production machines by an external service vendor would definitely have a very adverse impact on production targets. A vendor service price may be unnecessarily high due to hidden cost drivers. These are potential risks to optimal business performance if they are not checked and controlled.

The automatic Vendor Evaluation functionality in SAP ERP does not cover the derivation of scores for external services; therefore, SAP has provided other scoring methods to evaluate external service providers. These methods are semi-automatic and manual scoring methods. In this case, the functionalities of the Service Entry Sheet and Purchasing Info records are employed.

I cover the following areas:

  • The relevance of external service vendor appraisal
  • How to uncover and eliminate hidden costs for external services using Vendor Evaluation
  • How to configure the Vendor Evaluation settings for external service vendor appraisal
  • How the scores are derived and the end-to-end computation process
  • How to set up the Service Entry Sheet for Vendor Evaluation
  • How to set up the Purchasing Info Record for Vendor Evaluation
  • Tips for effective appraisal of external service vendors using Vendor Evaluation

I also explain how to use the Purchasing Info Record to score vendors for the price criterion that the semi-automatic Vendor Evaluation in the SAP system does not provide for in the standard process.

The Relevance of External Service Vendor Appraisal

Apart from the procurement of materials, organizations also procure a long array of external services that enable them to effectively carry out their business operations. This implies that the impact of external services performance can go a long way toward affecting their business operations negatively or positively.

Therefore, to ensure the optimal impact of external services to business operations, organizations must as a matter of necessity apply procedures to measure and control how external services are delivered. The Vendor Evaluation component in the purchasing component of the SAP materials management module (MM-PUR) provides a solution to appraise vendors for external services in quality and timeliness of delivery in the standard SAP system procedure. In addition to the appraisal of external services vendors for quality and timeliness, I provide a workaround to appraise the prices of services delivered that are usually provided in the standard SAP system.

In the SAP ERP system, the Vendor Evaluation functionality for external service vendors uses the semi-automatic and manual scoring methods for this type of vendor appraisal.

The semi-automatic scoring method derives the subcriteria used to appraise vendors from scores manually input at the Purchasing Info Record level for materials and Service Entry Sheet level for services. These scores are input manually and computed by the system to derive the subcriteria of the main criterion External Service. This is unlike the automatic scoring method in which every score is automatically generated without user interference. The standard semi-automatic subcriteria for the External Service main criterion in SAP ERP include quality of service and service timeliness.

In the manual scoring method, users assign scores to the subcriteria manually. These scores are then used to derive the higher level scores.

Patrick Imhen

Patrick Imhen is a business analyst and a certified SAP ERP consultant with proficient knowledge, skills, and experience in Materials Management (MM), Sales and Distribution (SD) and Plant Maintenance (PM) gathered from successful SAP implementations projects, support, training, business process analysis, modeling, unit testing, and integration testing. He has profound understanding of the supply chain process across industries and helps organizations cut the cost of operation and improve process optimization. He has more than 10 years’ experience in the business environment and six years’ experience in the SAP domain.

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