Page 103 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes
Did u know? Much of this attention to vender rating is a direct result of the widespread
implementation of the just-in-time concept in the United States and its focus on the critical
role of the buyer-supplier relationship.

Most firms want vendors that will produce all of the products and services defect-free and
deliver them just in time (or as close to this ideal as reasonably possible). Some type of vehicle
is needed to determine which supplying firms are capable of coming satisfactorily close to this
and thus to be retained as current suppliers. One such vehicle is the vendor rating.
In order to accomplish the rating of vendors, some sort of review process must take place. The
process begins with the identification of vendors who not only can supply the needed product or
service but is a strategic match for the buying firm. Then important factors to be used as criteria
for vendor evaluation are determined. These are usually variables that add value to the process
through increased service or decreased cost. After determining which factors are critical, a
method is devised that allows the vendor to be judged or rated on each individual factor.
It could be numeric rating or a Likert-scale ranking. The individual ratings can then be weighted
according to importance, and pooled to arrive at an overall vendor rating. The process can be
somewhat complex in that many factors can be complementary or conflicting. The process is
further complicated by fact that some factors are quantitatively measured and others subjectively.

Once established, the rating system must be introduced to the supplying firm through some sort
of formal education process. Once the buying firm is assured that the vendor understands what
is expected and is able and willing to participate, the evaluation process can begin. The evaluation
could be an ongoing process or it could occur within a predetermined time frame, such as
quarterly. Of course the rating must be conveyed to the participating vendor with some firms
actually publishing overall vendor standings. If problems are exposed, the vendor should formally
present an action plan designed to overcome any problems that may have surfaced. Many
buying firms require the vendor to show continuing improvement in predetermined critical
areas.

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Caselet 7 Tips for Rating and Evaluating Your
Suppliers and Vendors

t makes no difference what business you are in, suppliers and vendors play a key role
in your company’s success. Having a formalized system in place to track and evaluate
Isupplier and vendor performance is essential to the smooth operation and profitability
of your company.
Successful companies embrace their suppliers and vendors, viewing them as partners in
helping to grow the business. Making sure that this is a mutually beneficial partnership
will impact the price you are negotiating today and the quality of service you get in
future, says Dennis Wright, a management consultant from the SCORE Orange County
office. If a supplier/vendor is a key part or service to your operation invite that supplier
or vendor to strategic meetings that involve the product they work with.
A common mistake companies make is to have a combative relationship with their suppliers
and vendors. ‘That is the opposite of what you want to do,’ says Drew Greenblatt, president
Contd...

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