Supplier Selection - Criteria / Methods & Evaluation

The Supplier Selection Decisions

The decision to place a significant number of the volume of business with suppliers and should always be based on a set of criteria that makes sense. The art of purchasing and supply management is to make the reasons behind those decisions become possible. Typically, the analysis of the capability of the supplier is to meet the quality, quantity, delivery, price/cost, and the purpose of the service of informing those decisions. Some of the important attributes of the supplier that is associated to the main criteria may include the history of the past, power facilities and technical, financial status, organization and management, reputation, systems, procedural adjustments, communications, labor relations, and the location.

Decision Tree

selection Decision of suppliers can be seen as a decision making under uncertainty and can be represented with decision tree. To use the decision tree effectively, the buyer must identify options and criteria for the evaluation and estimate the chances of success and failure. Simple tree can be applied to the purchase of one-time without the presence of expectations the purchase again.

Identifying Potential Sources

Identified potential sources are key drivers of success or failure from the perspective of performance. Research in decision making and problem solving indicates that opportunity reaches an optimal decisions depends on the majority of the ability of decision makers to generalize alternatives.

Information Sources

The sources of Knowledge are important qualifications of various buyers. Sources can be searched by:

• Online sources: Internet and WWW provides rapid growth and ever-changing form of professional information supply. The challenge for a lot of buyers are not looking for information, but identifying, sorting, analyzing, and using relevant information.
• Catalog: the management of purchasing and supply Department should have a catalog of known sources of supply, covering the most important material that makes companies interested.
• Trade journal: Trade journal is also a source of valuable information from potential suppliers. A list of publications, of course, is very long, and individual items within it are very changed value.
• Trade directories: Trade directories are another useful source of information. They are very broad in its accuracy and its use, and the concern of being trained in using it.
• Sales representative: Sales representative may be one source of information that is available, reward with references to sources of supply, product type, and information about trade in General.
• Supplier and the Commodity Database: information from various sources, if valuable, should be arrested. For example, the index catalog makes it easy to access the catalog is needed.
• Visits to Suppliers: some feel that supply manager visit the supplier are more useful when they are difficult to discuss.
• Samples: in addition to ask and a factory visit, sample the products of the supplier can be attempted.
• Colleagues: often the internal business partners can be a source of valuable information about potential sources of supply.
• References: often a buyer will enter a request for references in the RFQ, RFP, or RFB. To get the most useful information, job interviewers to manage parameters of the interview.
• The Evaluation of Potential Sources

Evaluation of potential sources, usually, trying to answer two key questions:

• Whether the ability that supplier in sending the buyer needs satisfactorily in the short term or the long term?
• What is the motivation that in submitting the supplier needs in accordance with the expected buyers in the long term or short term?

Supplier Evaluation Methods

A method for evaluating the suppliers are divided into two:

• Informal and Semi formal Evaluating and Rating. Informal evaluation includes estimate of internal and supplier from anywhere in the Organization of the buyer which the contacts take place. "How are things going with supplier X?" became the usual questions that can and should be asked by personnel supply when in contact with others in their organization.
• A formal Evaluation and Supplier Rating. Accompany the trend of supply based on rationalization, strategic sourcing, and close relationships with key suppliers is growth experience in supplier performance rating. Often, sustainable improvement recorded continued with many traditional factors such as quality, quantity, delivery, and price.

Linking With Sourcing Strategy

From different sources of information, the buyer can afford to create a list of suppliers is available from the items that are needed. The first level of analysis is seeking a supplier which might be able to meet the needs of the buyer. The second level is to determine which suppliers are considered managers of supply and sourcing teams to become a serious source. 

This strategy must be thought of a few things such as whether the company uses single or multiple sourcing, manufacturing problems with distributors, sources of geographic location, size of the supplier, and the concern for social, political, and the environment.

Joint Purchasing with Suppliers

If the buyer's organization has more leverage on the market and the buying process more efficient, this may be an advantage to buying needs specific to supplier. Although the buyer will make a lot of extra load, this would be a net gain for either party in the transaction and the same agreement on shared cost saving.

Purchasing for Company Personnel

Other problems faced by most of the department's supply was decided to what level are justified in using the facilities for earn merchandise for employees of the organization or for executives. Many companies are not only selling the merchandise alone for their employees at a substantial discount and also allow them to purchase at the cost of a wide range of merchandise purchased by companies for their own use.

Strategy Development

Risk assessment is a key step in the development of the strategy. The risk of supply can be assessed in several ways. Pareto analysis comparing the dollar volume for variables such as percent of suppliers, percent of supplies, and a number of orders, development strategies that focus on high-dollar purchases. Portfolio analysis typically include supply market risk in assessing and focused considerable attention on the ability of increasing value.