Page 102 - DMGT525_MATERIALS_MANAGEMENT

Unit 7: Selection of Suppliers

Notes

Notes In any case, buyer must maintain a list of qualified suppliers to avoid solo-source
situation.
7.1.3 Negotiation and Selection Stage

Based on evaluation of suppliers and considering various other issues, a list of several acceptable
suppliers is prepared. These suppliers are called to discuss contract conditions concerning quality,
service and price. Trial order at competitive rates is given to selected suppliers.

Task Pick an organization of your preference and define technical and business
requirements for the supplier selection.

7.1.4 Experience Stage

In this stage, a close watch is kept on the performance of suppliers in terms of quality, i.e.,
conformance to specification and on time delivery. Once trial orders are completed, supplier
performance is evaluated choosing appropriate evaluation method. A feedback on the
performance is given to each supplier. Suppliers who meet the buyer’s need get registered and
become eligible to receive future orders.

Self Assessment

Fill in the blanks:
1. Normally, …………………...department maintains records of past and current suppliers.

2. …………………. is an important element in the supply chain.
3. ………………. is the most powerful and handy means to identify a potential source of
supply.

4. The ……….. is a formal way to request information from a supplier or vendor about a
product or service a buyer is about to procure.
5. The highest net rating denotes the best ……………….

7.2 Vendor Rating

Vendor rating is the outcome of a formal vendor evaluation system. Vendors or suppliers are
given standing, status, or title according to their attainment of some level of performance, such
as delivery, lead time, quality, price, or some combination of variables. The motivation for the
establishment of such a rating system is part of the effort of manufacturers and service firms to
ensure that the desired characteristics of a purchased product or service is built in and not
determined later by some after-the-fact indicator. The vendor rating may take the form of a
hierarchical ranking from poor to excellent and whatever rankings the firm chooses to insert in
between the two. For some firms, the vendor rating may come in the form of some sort of award
system or as some variation of certification.

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