Procurement Glossary
Supplier approval: Process for the qualification and approval of suppliers
January 19, 2025
Supplier approval is a systematic process for evaluating and approving suppliers before the first business activity. It ensures that only qualified partners are integrated into the supply chain and minimizes procurement risks. Find out below what supplier approval involves, which process steps are required and how you can use KPIs to measure success.
Key Facts
- Systematic qualification process before the first supplier assignment
- Includes technical, qualitative, financial and legal evaluation criteria
- Reduces supply risks and sustainably improves supply chain quality
- An integral part of strategic supplier management
- Basis for long-term supplier partnerships and compliance security
Contents
What is a supplier approval?
Supplier approval refers to the structured evaluation and approval process for new suppliers prior to the first business relationship.
Core elements of supplier approval
The approval process comprises several evaluation dimensions that are systematically checked:
- Technical expertise and production capacities
- Quality management systems and certifications
- Financial stability and creditworthiness
- Legal compliance and sustainability standards
Supplier approval vs. supplier evaluation
While the supplier evaluation continuously monitors existing business relationships, the approval takes place once before the start of business. It forms the basis for subsequent supplier qualification and ongoing monitoring.
Importance of supplier approval in Procurement
Systematic approval minimizes procurement risks and ensures compliance. It supports risk management through preventative risk identification and creates the basis for strategic supplier partnerships.
Process steps and responsibilities
The approval process follows standardized steps with clearly defined responsibilities between Procurement, quality assurance and specialist departments.
Pre-qualification and document check
The initial phase comprises the collection and evaluation of basic supplier information. This includes company data, certificates and references.
- Checking the supplier self-disclosure
- Validation of quality certificates and proof of compliance
- Evaluation of key financial figures and credit assessment
Audit and on-site assessment
Critical suppliers undergo a structured supplier audit to verify the documented capabilities. This is carried out by multidisciplinary teams from Procurement, Quality and Technology.
Release decision and documentation
Final approval is granted by a defined committee based on standardized evaluation criteria. The supplier status is updated accordingly and documented in the system.
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Important KPIs and targets for supplier approvals
Systematic key figures enable the evaluation of approval process efficiency and the continuous optimization of supplier qualification.
Process KPIs
Specific performance indicators are used to measure the release speed and quality:
- Average approval time (time-to-approval)
- Release rate after initial assessment
- Number of additional claims per release procedure
Quality KPIs
Release quality is evaluated using downstream performance indicators. High supplier failure rates after release indicate evaluation deficits.
Compliance KPIs
Compliance indicators monitor adherence to regulatory requirements and internal standards. These include audit success rates and the completeness of supplier certificates in the approval process.
Risks, dependencies and countermeasures
Inadequate approval processes can lead to significant procurement risks and compliance violations that require preventive measures.
Incomplete risk identification
Superficial assessments overlook critical risk factors such as financial instability or quality deficiencies. A systematic risk analysis with standardized checklists minimizes this danger.
Delays in the approval process
Lengthy approval procedures can jeopardize project deadlines and cause procurement bottlenecks. Parallel evaluation processes and digital tools speed up the process considerably.
Compliance violations and legal risks
Insufficient examination of legal requirements can lead to liability risks. Regular updates of the assessment criteria and integration of current compliance standards are essential for supplier credit checks.
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Practical example
An automotive supplier implements a digitalized approval process for electronic components. New suppliers undergo a multi-stage assessment: first, an online self-assessment is carried out via the supplier portal, followed by an automated credit check. Critical suppliers are audited on site, with quality management systems and production capacities being assessed. Final approval is given by an interdisciplinary committee from Procurement, Quality and Development.
- Reduction of the release period from 8 to 4 weeks
- Increase in first-time approval rate to 85
- Minimization of supplier failures by 40%
Trends & developments around supplier approvals
Digitalization and stricter compliance requirements are shaping the further development of supplier approval processes in modern procurement organizations.
Digital release platforms
Modern supplier portals automate the approval process through digital workflows and integrated evaluation tools. AI-based systems support risk analysis and document validation.
ESG integration in approval processes
Sustainability and governance criteria are increasingly being integrated into the approval assessment. Suppliers must provide comprehensive ESG evidence in order to meet the increased compliance requirements.
Continuous monitoring after release
The one-off approval is supplemented by continuous monitoring systems. Real-time risk assessments and automated alerts enable proactive reactions to changes at approved suppliers.
Conclusion
Supplier approval forms the foundation for successful supplier relationships and effective risk management. Systematic evaluation processes minimize procurement risks and ensure compliance. Digital tools and standardized workflows increase the efficiency and quality of approval processes. Companies that invest in structured approval processes create sustainable competitive advantages through qualified supplier partnerships.
FAQ
What is the difference between supplier approval and supplier evaluation?
Supplier approval takes place once before the start of business and qualifies new suppliers for collaboration. Supplier evaluation continuously monitors the performance of existing business relationships and assesses ongoing performance.
Which documents are required for supplier approval?
Standard documents include company data, quality certificates, financial reports, proof of compliance and references. Depending on the industry, additional certifications such as ISO standards or industry-specific qualifications may be required.
How long does a typical approval process take?
The approval time varies between 2-8 weeks depending on the complexity. Standard suppliers with complete documentation can be approved more quickly, while critical suppliers with audit requirements require longer processing times.
When is a new release required?
A new release is necessary in the event of significant changes to the supplier situation, such as a change of ownership, relocation or loss of certificate. It may also be necessary to update the approval after longer business breaks.
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