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6/24/2015 8 Major Rating Plans are utilized for Vendor Rating http://www.shareyouressays.com/116381/8majorratingplansareutilizedforvendorrating 1/9 8 Major Rating Plans are utilized for Vendor Rating by Pragati Ghosh Advertisements: After the trial orders are executed, it becomes necessary for the buyer to rate the vendors to enable him to determine how he should apportion his requirements among the vendors. In other words, the basic responsibility of the materials manager is not only to locate the sources but also to preserve them through continuous rating. A vendor’s performance in meeting the quality, delivery and price standards set by the buyer has to be assessed in a systematic manner. Techniques of Vendor Rating: The purchase organizations watch his enlisted suppliers continuously and take requisite corrective action. Following rating plans are utilized for vendor rating: (a) Categorical plan (b) Weighted point plan (c) Cost ratio method (d) Eavaston’s vendor selection (e) Forced decision matrix (f) Service cost ratio (g) Bell quality rating system (h) IBM quality rating system. (a) Categorical Plan:

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  • 6/24/2015 8MajorRatingPlansareutilizedforVendorRating

    http://www.shareyouressays.com/116381/8majorratingplansareutilizedforvendorrating 1/9

    8 Major Rating Plans areutilized for Vendor RatingbyPragatiGhosh

    Advertisements:

    Afterthetrialordersareexecuted,itbecomesnecessaryforthebuyertoratethevendorstoenablehimtodeterminehowheshouldapportionhisrequirementsamongthevendors.

    Inotherwords,thebasicresponsibilityofthematerialsmanagerisnotonlytolocatethesourcesbutalsotopreservethemthroughcontinuousrating.Avendorsperformanceinmeetingthequality,deliveryandpricestandardssetbythebuyerhastobeassessedinasystematicmanner.

    TechniquesofVendorRating:Thepurchaseorganizationswatchhisenlistedsupplierscontinuouslyandtakerequisitecorrectiveaction.Followingratingplansareutilizedforvendorrating:

    (a)Categoricalplan

    (b)Weightedpointplan

    (c)Costratiomethod

    (d)Eavastonsvendorselection

    (e)Forceddecisionmatrix

    (f)Servicecostratio

    (g)Bellqualityratingsystem

    (h)IBMqualityratingsystem.

    (a)CategoricalPlan:

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    Thecategoricalplanisasampleofallvendorratingschemes.Itreliesheavilyonthejudgementandexperienceofthedecisionmaker.Thepurchasermaintainsalistofhissuppliersandtheirproducts.Thevendorperformanceisreviewedperiodicallybyanevaluationcommitteecomprisingofallrepresentatives.

    Dependingupontheperformance,thevendorisgivenapluspoint,neutralorminus.Theperformancetrendsoveraperiodoftimearebuiltupandthevendorwithincreasingtrendofpluspointischosen.Apreponderanceofplusesorminusesneedsnotificationtosupplierwithcomments.

    Onthebasisofexperienceandperiodicalmeetings,alistoffactorscanbeestablishedonthesuppliersperformanceineachareaandeachfactorisgivenagradingasnever,seldom,usual,always,etc.Thissystem,thoughnonquantitative,providesameansofsystematicrecordkeepingonperformancecriteria.

    (b)WeightedPointPlan:

    Quality,deliveryorserviceandpricearethethreemostimportantattributesofagoodsupplier.Dependingupontheimportance,apurchaserattachestoaparticularattributehefixesaweightageforit.Thetotalweightagesarebeing100.Theweightages,forexample,oftheattributesareasfollows:

    Quality60%

    Delivery25%

    Price15%

    Thequalityrating(Table15.1),delivery(service)rating(Table15.2),pricerating(Table15.3)andcompositerating(Table15.4)arecalculated.

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    Theweightedpointplantechniqueenablesapurchasertoevaluateasupplieronquantitativebasis.Thisplanismoreobjectivethancategoricalplanandtheonlywaythesubjectivitycanenteriswhileassigningtheweights.Properrecordshavetobekept.

    Ifservicesofacomputerareavailable,thenthisplancanbeusedverysuccessfully.Underthisplan,thesuppliercanbeclassifiedasexcellent,acceptable,averageandunacceptableiftheircompositeratingisover90%,between75%and90%,between60%to75%andbelow60%.

    (c)CostRatioMethod:

    Thismethodrelatestoidentifiablepurchasingandreceivingcoststothevalueofshipmentreceivedfromrespectivesuppliers.Thehighertheratioofcoststoshipments,thelowertheratingappliedtothesupplier:Quality,delivery,serviceandpricearetheusualcategoriestowhichcostsareallocated,aftersubdividingeachfactorintovariouselements.

    Therespectivecostratiosaresuitablycombinedwiththevendorsquotedprice,todeterminethenetcost.Here,thevendorperformanceisreviewedperiodicallybyanevaluationcommitteecomprisingof

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    representativesfromalldepartmentsinvolvedwithpurchasing.

    (d)EavastonsVendorSelection:

    Thesupplierspastperformanceisutilizedinthechoiceofvendorsandthebasicstepsinthismethodareasfollows:(i)Thevendorsontheapprovedlistarerankedonthebasisofthebuyerssubjectiveevaluation,(ii)Thefirstsatisfactoryvendor,meetingorexceedingallthestandards,(iii)Iftheappliedvendorsdonotfulfilltheminimumstandards,thentheminimumstandardmayberelaxedtillavendorischosen.Itpresupposesthatstandardsofacceptabilityforeverycriterionareformedtofitinordertotakedecisions.

    (e)ForcedDecisionMatrix:

    Theattributesofratinglikeprice,quality,service,reliabilityofthesupplier,leadtimeofsupplyetc.areidentifiedfirst.Thenthesefactorsarecomparedbetweenthemselves,likequalityandprice.Ifpriceisconsideredmoreimportantthanqualitybytheevaluationcommittee,thenaweightageofoneisgiventopriceandzerotoquality.

    Thequalityiscomparedwitheachoftheremainingfactorsandtherelativeweightagesarerecordedintheformofatableormatrix.Similarly,eachfactoriscomparedinturnwitheachoftheothersandtheirrelativeweightagesarerecorded.Weightagesgiventothedifferentattributesareaddedupforeachattributeanddividedbythetotalnumberofcomparisonstogivetheattributeweightagecoefficientforeachattribute.

    Afterthis,thenextstepistocomparethesuppliersinpairsinrespectofeachattribute,givingthesuperiorsupplieraweightageofoneandtheother.Theseresultsaretabulatedandthesupplierweightagecoefficientisthusobtained.

    Theabovetwotypesofcoefficientsarecombinedbymultiplyingforeachattributeandforeachsupplier.Thesearethenaddeduptogivethetotalweightageandthisisrankedtotaketheappropriatedecisionsonthevendors.Theweightagecanbevariedandthematrixcanbesuitablybuiltforalargenumberofsuppliersandevaluators.

    (f)ServiceCostRatio:

    Thereareotherintangibleaspectsofasuppliersservices.Theycanonlybemeasuredsubjectively.Theprocedureisasfollows:

    (i)ListingtheservicefactorslikeR&D,Labourstability,financialstability,flexibilityinproductionforrushorders,etc.

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    (ii)Assigningweightstoeachfactoraccordingtoitsimportancetothepurchaser.

    (iii)Settinganacceptablenorme.g.,outofatotalofa100servicepoints70maybeanacceptablenorm.

    (iv)Ratingsuppliersforeachservicefactor.

    (v)Determiningthepercentagebywhichthesupplierisoverorundertheacceptablenorm.

    (vi)Multiplyingthepercentageobtainedin(v)byvalueofpackagepercent.Forsophisticateditemsthevalueofpackagepercentmaybe10%andforcommonBazzaritemsitmaybejust1%.

    (vii)Thepercentagefigurearrivedatin(vi)isminusifthepercentagein(v)isovertheacceptablenormandisplusifitisbelowtheacceptablenorm.

    Thesampleprocedureofcalculatingtheservicecostratioisshownintable15.5.

    (g)BellQualityRatingSystem:

    ThebellhelicoptercompanydevelopedaLotQualityIndex(LQI),whichgiveanassessmentofalllotsreceivedagainstlotsrejected,bydispositionandcategory,asthecompanyattachesgreaterimportancetoquality.TheLQIisgivenby:LQ1X/L,where

    L=totalnumberoflotsreceivedduringtheperiod,x=(L1x1.00)+(L2x2.10)+(L3x2.90)+(L4x3.10)

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    +(L5x3.90)

    L1=Numberoflotsacceptableasreceived

    L2=Numberoflotsrejectedbysamplinginspectionbutlabelled.

    L3=Numberoflotsrejectedanddispositioned,reworkatsuppliersend.

    L4=Numberoflotsrejectedanddispositioned,returnednotusableand

    L5=NumberoflotsrejectedanddispositionedreworkatBellhelicoptercompany.

    Theweights1.00,2.10etc.weredeterminedatthecompanyafteracarefulstudyofthecomplexityandnumberofoperationsrequiredtohaveausablelotfromaparticulardispositionedlot.Itisclearfromtheaboveequation,thatthebestlotqualityindexfigureratesis1.0,theworstis3.90.Theformulacanbemodifiedeasilytosuittheneedsofaparticularfirm.Thequalityratingcanbecombinedwithratingforotherparameters,todevelopsuitablevendorratingschemes.

    (h)IBMQualityRatingSystem:

    TheIBMratingsystemusesqualitycostsasthebasisforratingsuppliers.Theformulaforthevendorqualityratingis:

    VGR=Desiredcostofinspection/Actualcostofinspectionx100

    Thecostincurredininspectingacceptablematerialisthedesiredcost,thecostofinspectingrejectedmaterialbeingexcludedfromit.Theactualcostofinspectionincludescostincurredininspectingacceptableaswellasrejectedmaterialpluscostassociatedwithextrahandlingofrejectedmaterial.

    Inspectioncostisobtainedbymultiplyingtheactualtimespentoninspectionbythestandardrate.Thematerialhandlingcostisfoundbymultiplyingthenumberofdocumentstoprocesstherejectedmaterialbyastandardcost.

    Advantages:

    TheIBMqualityratingsystemthefollowingadvantages:

    (a)Factorsofcostusedarewellunderstoodbythesuppliers,

    (b)Allratingfactorsarebroughtdowntocommonbasiccostsandcanthereforebecombinedevenifthefactorsthemselvesaredifferent.

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    (c)Someminordefectsareallowed,solongasthequalityrequirementsareclearlymet.

    (d)Itestablishesalongrangegoalofwhatagoodsuppliershouldsupply.

    (e)Nocomplicatedweightingfactorsarerequired.

    (f)Whencentpercentinspectionisrequired,itprovidesforequitablerating.

    (g)Whencentpercentinspectionisrequired,itconsiderstheinspectioncost.

    (h)Thesamedatacanbeusedtofindoutwhichsuppliers,costthecompanymoreandwhichitemsrequiremoreinspectiontime.Basedontheinformation,inspectionmethodsmaybeimprovedandattentioncanbedirectedtowardsthecostlysuppliers.

    TheIBMsystemonqualityratingisuseful,whentherearealargenumberofsuppliersvendingseveralproducts.Theinspectioninformationisfeddirectlyintothecomputer(oraccountingmachine),whichcomputestheratingsandsummarizestheinformationinvariousways,liketypeofdefects,partnumber,suppliercode,finalproductetc.forfurtheranalysis.

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