8 major rating plans are utilized for vendor rating

6/24/2015 8MajorRatingPlansareutilizedforVendorRating

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8 Major Rating Plans areutilized for Vendor RatingbyPragatiGhosh

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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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