shahank soni vendor evaluation presentation
TRANSCRIPT
VENDORS Evaluation and Selection
By Shashank Soni 13MT07IND016
Importance of Supplier Selection Supplier Selection Process Benefits of Supplier Selection Process Supplier Evaluation Criterias Supplier Evaluation Methods
EXAMPLE PROBLEM CONCLUSION
One of the most important processes performed in organizations today is the evaluation, selection and continuous measurement of suppliers.
Selecting a vendor is now as important a process as developing new products.
Supplier selection process is a multi-criteria problem, which includes both qualitative and quantitative factors.
Relatively small cost reductions gained in the acquisition of materials can have a greater impact on profits.
A sound supplier selection decision today can reduce a host of problems tomorrow
Steps in Supplier Selection Process
Evaluating Needs and Defining Objectives Gathering a Limited Pool of Vendors Interviewing with Vendors Selecting and Applying the Method
What need you are looking to satisfy?Increase product quality
Which evaluation categories you will use? What are your business, technical and usability requirements? What are the must requirements?
Max price, min performance, etc How will you score the requirements?
Evaluating all potential vendors takes much time
Basic screening and elimination due to lack of must requirements
One by one interview with vendors Gap analysis between your
requirements, objectives and vendor properties
Scoring each criteria
Helping minimize subjectivity in judgment and make it possible to consider all relevant criteria in assessing suppliers.
Providing feedback from all areas in one package.
Facilitating better communication with vendors. Providing overall control of the vendor base. Requiring specific action to correct identified
performance weaknesses. Developing a performance-based culture.
The evaluation criterias are fundamental to choose the best supplier. They are specific to each firm, because they vary according to the needs.
The criteria exposed are the most common ones.
Six categories of criteria selected
The six classes for the suppliers’evaluation
Measurement: FINANCIAL HEALTH EXPERTISE OPERATIONAL PERFORMANCE METRICS BUSINESS PROCESSES & PRACTICES ENABLING BEHAVIORS OR CULTURAL
FACTORS RISK FACTORS
Select one among various methods THE CATEGORICAL METHOD THE WEIGHTED POINT METHOD THE COST-RATIO METHOD
Calculate overall vendor score using selected method
Select the vendor with best score
Basically, it is a procedure whereby the buyer relies on a historical record of supplier performance.
Initially, a list of evaluation criteria is identified.
The buyer then assigns a grade to each supplier, for each criterion, based on past experience.
A simple marking system of plus, minus, and neutral grades may be used.
Evaluation lists are often provided to other departments involved, such as quality control, engineering, production, and receiving
Vendors with composite high or low ratings are noted, and future supply decisions are influenced by them.
Although this system is non-quantitative, it is a means of keeping systematic records of performance.
It is also inexpensive and requires a minimum of performance data.
However, the process relies heavily on the memory and judgment of the individuals providing the ratings, and the ratings may become routinely performed without much critical thought
Weighted-point method quantifies the evaluation criteria.
A number of evaluation factors can be included, and their relative weights can be expressed in numerical terms so that a composite performance index can be determined and supplier comparisons made.
For example, following evaluation criteria have been chosen: quality of shipments, accuracy of delivery, and price.
Assuming that quality and delivery are the most significant, a point rating system such as the following might be used: quality, 40 points; delivery, 40 points, and price, 20
points.
The cost-ratio method relates all identifiable purchasing costs to the value of the shipments received from the respective suppliers.
The higher the ratio of costs to shipments, the lower the rating for that supplier.
What cost categories are used depends on the products involved.
Quality, delivery, service, and price are the overall categories, and respective costs are accumulated for each.
For example, costs associated with quality normally include
the costs of unusual visits to a vendor's plants, unusual inspection costs of incoming shipments, and all costs associated with defective products,
including rejected parts and the resulting manufacturing losses.
This study was conducted by a light engineering industry X on pressure die-casting ancillaries supplying common parts situated near the location of X. The study aimed to find the best out of the four vendors
K, L, M and N.. Criteria for evaluation were cost, quality, schedule adherence, system adaptability and general cooperation
weight Supplier k Supplier l Supplier m Supplier n
Quality 0.35 3 4 2 1
Price 0.15 1 2 4 3
Service 0.25 2 1 3 4
delivery 0.25 4 2 1 3
Similarly…
Supplier k 2.7
Supplier l 2.45
Supplier m 2.3
Supplier n 2.55
Result – According to the previous results, the higher weight belongs to supplier k,and is judge to be the best overall
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