vendor evaluation from buyer perspective

2009 Jiaul Haque Email id: [email protected]

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VENDOR EVALUATION FROM THE BUYER’S

PERSPECTIVE

RESEARCH PROJECTON

PRESENTED BYJIAUL HAQUEMFT-IVNIFT BANGALOREBatch: 2007-2009


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INTRODUCTION

The concept of retail business has changed from the manufacturer driven to customer driven. Buying house are playing a vital role in this global purchasing environment to deliver the right product, at right place, at right price, in right quantities and qualitiesat right time with right Manufacturing Processwith maintaining proper social compliance. So it’s an utmost importance to the buyer to evaluate and select vendors, and structuring the vendor base to fulfil the customer requirements.


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OBJECTIVES:

•To establish an efficient vendor evaluation framework for

the buying house.

SUB-OBJECTIVE:

•To study the current vendor evaluation system in Decathlon.

•Critically analyse the present evaluation procedure and to study

the present vendor evaluation system in other buying

organization.

•To Design a Vendor Evaluation framework for the Buying

House.


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METHODOLOGY•Study the literature available on vendor evaluation system.

•Study the current vendor evaluation stages at Decathlon

•Study the current system of vendor evaluation followed by the buying

house.

•Critically analyze the current system.

•Study the other various criteria present to perform vendor evaluation.

•Suggest changes if needed, and implement the same or design or

develop a new evaluation framework which is more effective and

efficient.

•Analyse the new Evaluation Framework.


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VENDOR SELECTION AND EVALUATION PROCESS

Assessing own sourcing needs.

Identify key sourcing requirement

Determine Supplier Sourcing strategy

Identify potential supply source

Preliminary evaluation of Potential Vendors

Determine method of supplier evaluation and selection

Select supplier


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METHODS FOR EVALUATION OF VENDORS

1. Weighted rating method

2. Single most important criterion method

3. Minimum cut-off method


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WEIGHTED RATING METHOD

Criteria selection

Criteria weighting

Supplier selection

Supplier rating

Weighted rating


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ELEMENTS OF VENDOR EVALUATION SYSTEM

1. Overall score

2. Main criteria

3. Sub criteria

4. Scoring range

5. Weighting of score


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NEW VENDOR EVALUATION STAGES AT DECATHLON

Determine sourcing needs in terms of product family, style, quantity per year

Informing different production country about the sourcing needs

Determine the desired target suppliers in terms of capacity, schedule etc.

Collection of New Vendor addresses

The suppler list is narrowed down

Supplier Visit and Supplier Evaluation Form Fill-up

If sourcing need exceeds existing supplier capacity

Meeting with the desired target capacity


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Continue…..

Supplier price quotation

Perform Supplier Quality and Social Audits

Contract Agreements and Trial Run

First Mass Production Order Placement

Supplier Pricing Policy matching


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DECATHLON NEW SUPPLIER EVALUATION PARAMETERS (SUPPLIER EVALUATION FORM):

EXISTING NEW SUPPLIER EVALUATION FORM


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CRITICAL ANALYSIS OF THE PRESENT VENDOR EVALUATION FORM

�All the parameters are not well defined.

�The parameters in evaluation form are more subjective rather than objective.

�The final decision is taken by doing the SWOT analysis of the buyer without

having any exact figure of evaluation score.

�No scope of comparing the required capacity of supplier that is looking for with

the supplier that is now being evaluated.

�Also less importance is given on the pricing strategy, level of pricing etc. during

evaluation, though they have one more stage of pricing.

�Here there is no systematic way to evaluate all the parameters and get a

cumulative score marks after the evaluation is done.

�No information are collected about the type of organization IS a vertically

integrated or not and from where do the source their raw material like, fabrics,

trims & accessories and about their supplier evaluation system.


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OTHER VARIOUS PARAMETERS THAT CAN BE INCLUDED IN VENDOR EVALUATION

FORM

�The history of the establishment regarding delivery issue

�Delivery on time percentage

�Quantity reliability

�Respect to Compliance with shipping instructions (GTD)

�Quality

�Non quality cost rate

�Quality performance of deliveries

�Problem solving

�Complaint/Rejection level


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Commercial�Follow-up commercial (events of prod, of delivery, delay for the requests…)

Purchasing�Sourcing process

�Subcontractor performance


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Conception – Development�Specific know-how

�Number of new products or solution proposed per year

�Design office or development capacity

�Number of prototype done to get the right one as per order

�Time to get first prototype (in days)

Competence�Industrial engineering

�Customer support and communication

�Electronic communication

�Merchandising setup


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Production Flow

�Flexibility of the organization to accept the variation in order

quantity with respect to the given forecasted quantity.

�Production quality- no of quality problem in last year.


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NEW SUPPLIER EVALUATION FRAMEWORK

There are three stages of documentation for vendor evaluation. These three

document to be completed to complete vendor evaluation. These are

1. Target Supplier evaluation minimum criteria information Form

2. Supplier Introduction Framework

3. Supplier Evaluation Framework.

I. Changeable Framework Parameters:

II. Final Evaluation Framework:

NEW SUPPLIER EVALUATION FRAMEWORK


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Supplier Overall Score Measurement

The supplier overall score is measured in percentage by using weighted rating method. The main criteria and their percentage weight assigned are

Sl No MAIN CRITERIA PERCENTAGE WEIGHT

1 Conception - developmentDesign - development

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2 Production - flow 263 Quality 124 Commercial 4.55 Financial aspects & generalities 4.56 Production 57 Process 148 Pricing policy 109 Desirability 310 Other production facility 6

Total 100


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OVERALL SCORE CALCULATION:

Scoring Range Grade Points

High 4

Medium 2

Low 0

Scoring Range and Grade Points:

Overall Score Calculation:

�Each parameter weighting score= (% weight*Grade Point)/4

�Final Performance of the supplier is expressed by adding all the individual

parameters weighted score. It is expressed as percentage.


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ANALYSIS OF NEW SUPPLIER EVALUATION FRAMEWORK

�All the parameters in new evaluation frameworks are in objective form

rather than subjective form in the old evaluation framework.

�Through this framework number of supplier can be compared on the

same parameters with overall score.

�Here all the parameters are well defined to categorize in three grades,

High, Medium, Low.

�All the main criteria and sub-criteria are well categorized.

�From this framework we can have a numeric value of the overall score

which helps to take decisions.


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�This format can be fitted for the evaluation of any target capacity suppliers

and all the categorization of high, medium; low can be defined as per the

requirements of the buyers.

�Through this evaluation framework many figures can be co-related to

compare many of suppliers.

�As all the parameters are more elaborately defined it will take less time to

perform vendor evaluation.

�Less skilled professional will be able to perform the vendor evaluation trough

this framework.

�Here the evaluator has a clear idea about requirements of the necessary

infrastructure of the supplier.

Continue…


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THANK YOU…!!!

vendor evaluation from buyer perspective

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