Carter’s 10C Supplier and Contractor Evaluation Model is designed to enable procurement and contracting professionals to make robust and sustainable supplier, contractor and vendor selection decisions. The correct decision, along with a robust scope of work, can have a disproportionately positive impact on the outcome in terms of risk, cost, quality and time. Conversely, the risks of selecting a sub-optimal supplier can be very significant.

Dr Carter offers a range of events related to his 10c Model including:

• Practical support for clients making critical supplier, contractor, and vendor partner selection decisions
• Practical workshops to guide practitioners through the 10c methodology and process
• Practical training sessions, covering all aspects of the model from introduction to advanced practitioner

For more details, please contact info@dpss.co.uk

The History of the 10C Model of Supplier Selection

The model was first published in the CIPS Supply Management journal in 1995 and soon became very popular with procurement professionals. The 10c model is recognised by the profession as being a fundamental part of the body of knowledge and is included in the Chartered Institute of Procurement and Supply syllabus, and states “Carter’s 10 ‘s of supplier appraisal is a widely used checklist during the sourcing process to appraise potential suppliers either pre or post contract award”.

Tim Cummins, WorldCC’s President, states, “The 10C model is a widely used, practical tool which supports more effective supplier evaluation and selection. It ensures risks have been identified and evaluated and causes the buyer to consider what really matters in terms of supplier performance”.

The model has been adopted and adapted by many organisations. The more recent version of the model makes extensive reference to the validity of the evidence provided by suppliers and contractors to support their claim to be appropriate business partners and providers.

Many fellow professionals have made effective use of the 10c model since its creation. These include those working in Royal Dutch Shell, IACCM, John Lewis, De la Rue, Chevron USA, Hitachi Rail, ADNOC, Saudi Aramco, Centrica, Royal Bank of Scotland, Boots, Serco, Coca Cola, Wigan Council, Virgin Media, NAM B.V, NHS, A4e, DWP, UK Intervention Board, Ericsson, Total Oil, Sports Council, British Aerospace, Leonardo Land and Naval, Rolls Royce, Marconi, Ordnance Survey, NDC, Caspian Pipeline Consortium, Tengzichevroil Company and many more.

Background to the Development of the Model

Research indicates that many of the post-award non-performance issues, such as disputes, commercial failures, poor quality and service, etc., have their origins in the lack of a robust supplier and contractor selection and evaluation process. It is also well known that ineffective scopes of work and poor management of courses post-award can also contribute to sub-optimal outcomes. The 10c model was created by Dr Carter to provide a framework and thought process to enable this critical decision to be made more effectively.

Competency ‘Able to do’

Evidence of a supplier’s capability is always required when selecting a provider. Suppliers will claim that they have an unimpeachable record of accomplishment, but these claims should always be viewed with some scepticism unless supported by evidence. Such evidence may take the following forms.

• Training and Development – what evidence exists that the supplier has a planned system for the training and development of staff, particularly regarding key initiatives that may help the supplier become ‘world class’?
• CVs/Qualifications – CVs and records of the qualifications of all key staff should be available for inspection. The presence of highly qualified staff is no guarantee of a company’s performance, but it is a guide.
• Key People – who are they? They should be identified and interviewed, where possible, to ascertain their role in the supplier’s performance and in the supplier’s ability to perform to a high level in future.
• Recruitment – what records exist of the supplier having recruited people into key positions and the criteria applied to the recruitment of those people?

Capacity – ‘To meet present and future demands’

We need to review the Order Book – what is the state of the supplier’s order book?   Unfortunately, the answer to this question requires some interpretation. If the supplier’s order book is full, it means, on the one hand, that many customers have faith in the supplier and have awarded many contracts to them. This is a good ‘pointer’ to the supplier being effective. On the other hand, a full order book may mean that the supplier, realistically, will be unable to meet the buyer’s requirements

Operational Statistics – does the supplier have statistics that provide evidence of such issues as quality problems or service level expressed as a percentage? If the supplier is ISO 9000 accredited, evidence should be available. Credible suppliers that are not accredited should be able to provide evidence of their past performance. It should be remembered that, just because a supplier has been proficient for customers in the past, there is no guarantee that they will be equally good in future.

Capacity – what is the total capacity of the supplier’s resources? If a contract is awarded, do they have sufficient capacity to meet our requirements, now and into the future?

Forecasts – what future business does the supplier forecast that it is likely to obtain? If this is substantial, it might be a sign of confidence, but how and where will the supplier be able to fit in the buyer’s business in this event?

Administrative Resources – Does the supplier have the necessary systems and procedures to support good quality and high levels of service?

An example is an efficient sales order processing system so that the buyer can be confident that orders will be processed efficiently and effectively. Another would be an efficient production control system so that, once the order has been processed, the buyer knows that it will be possible to track its progress through the supplier’s production process. A good expediting system may be linked to this to enable buyers’ queries regarding the progress of their orders to be dealt with smoothly and efficiently.

Site Visit – for many buyers, this is the most effective means of evaluating potential suppliers. A site visit can tell the buyer much about how the supplier conducts their business in general, as well as about their capacity. For example, claims that a supplier may make about having capacity all used up are difficult to support if it is obvious that the supplier’s premises are virtually empty of raw material, with few obvious signs of work taking place. A site visit is a good opportunity for the buyer to challenge the supplier as to aspects of quotations that are not clear or that do not appear to make sense. Site visits are also useful, in a general sense, because they allow the buyer to learn about industrial processes and systems. This information adds to the buyer’s general experience/ knowledge.

Commitment to Quality – ‘The supplier’s efforts to deliver quality products and services every time’

Does the supplier have a quality policy and a commitment to its success? This may be assessed by examination of whether the supplier used any or all of the following:

SPC – Statistical Process Control. A statistical method for measuring the actual quality of a product and for identifying trends that slip outside tolerance limits and taking corrective action before a problem actually occurs. This helps to enhance quality and, at the same time, keep costs associated with quality down;

TQM – Total Quality Management. A quality-conscious attitude throughout the organisation that should help guarantee improved quality to the end customer.

QC – Quality Control. What specific measures does the supplier employ to measure the quality of output?

CIP – Constant Improvement Processes.   Does the organisation have within its structure evidence that it is continually striving to improve itself?

Culture and Values

Does the supplier have an organisational culture and a set of corporate values, communicated to everyone who works there, which focus on quality and its achievement/improvement at all times? Some management thinkers/writers state that organisational culture is one of the most important aspects of a company in terms of its ability to be effective and successful.

ISO 9000 – Is the supplier accredited to this standard? Accreditation of a supplier to such a standard is no guarantee of quality, but should be a good guide and should guarantee a sound quality system. Other possible standards that assess quality are QS 9000 (American car manufacturers’ more stringent version of ISO 9000) and ISO14000 (this includes an environmental standard)

Consistency – Able to provide consistent levels of quality and services’

We need to establish that the supplier will be able to deliver consistently high levels of quality and service throughout the life of the contract. The suppliers’ account management system sometimes evidences this, whereby the supplier has appointed a dedicated person to manage the account and to be the focal point and liaison between the buyer and the supplier.

Communication

Is the supplier able to demonstrate that they can set up and manage appropriate channels of communication between all the stakeholders? This could take the form of regular meetings, Skype/Zoom/Teams events and teleconferences. Is the supplier able to provide a dedicated point of contact? Can the supplier demonstrate that a robust enquiry ticketing system is in place?

CSR – ‘Is the supplier compliant with good ethical and legal best practice?’

Suppliers, products and services should satisfy legislative and other environmental requirements. Evidence of conformity might include policy and processes aimed at delivering ethical best practice, positive media or feedback, ratings agencies, news archives, etc. Negative publicity and legal challenges may be signs that all is not well.

Cost – ‘The total cost of the goods or services’

Full cost analysis – full cost breakdowns should be obtained from the supplier, and a full analysis carried out to examine the following.

Profit – Is the supplier profitable? If the supplier is not making sufficient profit, then it is unlikely that they will remain in business in the medium to long term. It is, therefore, in the buyer’s interests to ensure that suppliers remain profitable. There is an old-fashioned view favoured by some buyers that a supplier’s profitability is no concern of the buyer’s. However, it should be remembered that, if a supplier goes into liquidation, in the short-term the buyer will be without supplies and, in the long-term, will have to go through the entire sourcing process again at great use of time, effort and cost.

Variable Costs – costs directly associated with production and which increase with production volume. Usually, they are direct labour costs and direct material costs. Questions that may arise include: is the supplier paying the workers the ‘going rate’ for the work, and is the supplier paying the right price for raw materials and components? If the supplier is paying high wages to workers, input costs will be too high, but paying less than the ‘going rate’ may result in industrial unrest and supply delays. Similarly, paying too much for materials will result in input costs being inflated and a high selling price, whereas paying too little may have adverse quality effects.

Fixed Costs – The buyer should assess and analyse the specific level of such contribution. The costs associated with such things as indirect labour (labour or staff not directly concerned with output), energy, rent, etc. It is usual for the selling price of a product or service to contribute to these fixed costs. The buyer should assess and analyse the extent of this contribution. Over contribution from the selling price means that the selling price is too high, whereas under contribution means that the supplier is in danger of going into liquidation.

Margins – what is the supplier’s profit margin? It should be remembered that all companies (including suppliers) must make a profit. If not, they will not survive for very long. In the event of their going bankrupt, the buyer would be without a supplier. This is not a desirable state of affairs. The question is: what profit margin should a supplier make?

Break-Even Point – this is the quantity of production where total costs equal revenue. Above this point, the supplier makes a profit, and below this, the supplier will make a loss. It is useful for the buyer to be aware of the supplier’s break-even point because it may have a bearing on the supplier’s optimum production quantity. One way to ensure that the buyer is paying the right price is, if possible, to buy the supplier’s optimum production quantity.

Cash/Finance – ‘Financial Stability’

Balance Sheet – a record of fixed and current assets and how they have been financed.

Profit and Loss Account – This is an account of the supplier’s trading over the previous year. It indicates the difference between the company’s income and the costs of running the business and indicates whether the supplier is making a profit or not.

Credit Rating – a rating by financial institutions, such as banks, of how creditworthy the supplier is. A poor rating should sound a warning and should be investigated.

Reputation – what kind of reputation for, e.g. financial propriety or profitability, does the supplier have? This kind of information may be found out via the ‘grapevine’.

The following financial analysis ratio provides a useful model for assessing a supplier’s financial performance.

Return on Assets = Profit x 100 x 100

Assets

Current Ratio = Current Assets

Current Liabilities

Liquidity Ratio = Current Assets Minus Inventory

Current Liabilities

Debtors Turnover = Debtors x 52

Control of Key Processes – ‘Supplier has control of their business’

Evidence will include information on the control key aspects, such as:

• Inventory;
• Quality;
• Operations;
• Procurement;
• Marketing;
• Distribution;
• HSE (Health, Safety and the Environment).
• It is important to gain an insight into how the supplier manages and controls these ‘key’ processes. Each is important, in its own way, in terms of ensuring that the supplier can supply the goods or services required, at the right time, of the right quality, at the right price, delivered to the right place, in the right quantity – the classic 5 ‘rights’ of procurement.

Here are examples of how each of these might contribute to the achievement of the ‘5 rights’.

Inventory – if the supplier carries sufficient inventory, they are likely to be able to supply the right quantity at the right time. On the other hand, carrying too much stock will adversely affect the supplier’s ability to supply at the right price because of excessive input costs.

Quality – control of the supplier’s quality processes enables the supplier to supply at the right quality. Conversely, over-specification of quality requirements may adversely affect the supplier’s ability to supply at the right price.

Operations – good control of operations will enable the supplier to supply at the right time and in the right quantity, and will influence the right quality.

Procurement – efficient procurement, utilising the latest sourcing ‘tools’, will affect all the ‘5 rights’, because companies are heavily dependent on key suppliers to provide good quality, service, innovation, etc., while keeping costs down.

Marketing and, to a greater extent, distribution – good, efficient processes here will allow the supplier to supply at the right time and in the right quantity.

HSE – good systems and procedures here, such as a good safety record, will contribute to the morale and motivation of the supplier’s workforce. A well-motivated workforce will affect all of the ’5 rights’.

Inefficiencies in any of these areas can cause the supplier’s costs to escalate. Many buyers take the view that knowledge of suppliers’ costs will allow the buyer to identify inefficiencies and make suggestions to the supplier as to how such inefficiencies may be eradicated, to mutual benefit.

Culture and Relationships

Suppliers and buyers should share similar values. There is increasing importance given to the nature of the relationship that is likely to exist between the buyer and the supplier (organisational). Some buyers try to assess this relationship on an ongoing basis; a breakdown in this relationship can cause premature termination, the need to retender, a requirement to invest in developing a new relationship, or worse, legal action.   Conversely, a strong relationship could foster a long-term and sustainable partnership that may add value to both parties.