Supplier Selection

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  • Topic: Customer service, Decision tree, Decision analysis
  • Pages : 6 (1897 words )
  • Download(s) : 484
  • Published : July 17, 2010
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Introduction

The evaluation and selection of suppliers, structuring the supplier base is an important task in any organization. It assumes utmost importance in the current scenario of global purchasing. Every Organization especially manufacturing organizations need to have a Supplier evaluation matrix or model in place. This paper tries to bring in a typical Supplier Evaluation Framework, which blends with company’s basic values, and help in establishing a Strategic sourcing policy. It also outlines ways and means to reward a supplier and establish long-standing relationships with suppliers. Vendor selection range of criterions

Today’s consumers demand cheaper, high quality products, on-time delivery and excellent after-sale services. Hence, companies are under intense pressure to cut product and material costs while maintaining a high level of quality and after-sale services. Achieving this starts with supplier selection. Therefore, an efficient supplier selection process needs to be in place and of paramount importance for successful supply chain management. It begins with the realisation of the need for a new supplier; determination and formulation of decision criteria; pre-qualification (initial screening and drawing up a shortlist of potential suppliers from a large list); final supplier selection; and the monitoring of the suppliers selected (i.e. continuous evaluation and assessment). The supplier selection can be seen as decision making under uncertainty and can be illustrated by a decision tree diagram as follows:-

|
| | | | | a| Satisfactory|
| | | | | | | |
| Supplier | A| | | | | |
| | | | | 1a| Unsatisfactory|
| | | | | | | |
| | | | | | | |
| | | | | b| Satisfactory|
| Supplier | B| | | | | |
| | | | | | | |
| | | | | 1b| Unsatisfactory|
| | | | | | | |

Above diagram show a simple decision making situation with only two suppliers considered and two possible outcomes. It shows, however, the uncertainty environment present in almost every supplier choice and the risk inherent in the decision. To use the decision method effectively, buyer must identify the options and criteria for evaluation and assess the probabilities of success and failures. The vendor selection process can be a very complicated and emotional undertaking if one don't know how to approach it from the very start. Here are five steps to help to select the right vendor. This guide will show how to analyze business requirements, search for prospective vendors, lead the team in selecting the winning vendor and provide with insight on contract negotiations and avoiding negotiation mistakes. It begins by gathering data or perform interviews, assemble a team of people who have a vested interest in this particular vendor selection process. The first task that the vendor selection team needs accomplish is to define, in writing, the product, material or service that you are searching for a vendor. Next define the technical and business requirements. Also, define the vendor requirements. Finally, publish document to the areas relevant to this vendor selection process and seek their input. Have the team analyze the comments and create a final document. In summary: 1. Assemble an Evaluation Team

2. Define the Product, Material or Service
3. Define the Technical and Business Requirements
4. Define the Vendor Requirements
5. Publish a Requirements Document for Approval
The identification of potential sources is a primary qualification for any effective buyer. Information sources from internet, trade portals and journals, e-catalogue, advertisements, suppliers and commodities directories, sales interviews, professional contacts are some of the most common tools used. The choice of suppliers selection can considers the following parameters as the Common supplier selection criteria: * Previous experience and past...
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