Page 104 - DMGT525_MATERIALS_MANAGEMENT

Unit 7: Selection of Suppliers

of Baltimore-based Marlin Steel Wire Products, which makes custom stainless steel metal Notes
baskets, brackets and other parts. ‘A lot of companies will actually have an adversarial
relationship where they hire purchasing people who have on brass knuckles and try to
beat up on vendors to get better prices or better terms.’ That is a very shortsighted way to
do business, according to Wright and Greenblatt.
Instead of getting stuck on price, focus on quality of service. A vendor can have the lowest
price and the lowest quality of work, too. Your goal is understand what value-add is a
given vendor bringing to your company. Your business should have a system in place for
evaluating, selecting and then reevaluating the suppliers and vendors it works with.

Here are seven tips and tools you’ll need to effectively rate your suppliers and vendors,
track their performance, and ultimately increase your company’s overall productivity.
1. Establish Performance Indicators

2. Classify Multiple Suppliers and Vendors
3. Devise an Evaluation Method
4. Determine Who’s Calling the Shots
5. Maintain Good Relationships

6. Decide When to Issue a Red Flag
7. Cut Loose Weak Links

Source: http://www.inc.com/guides/2010/12/7-tips-to-rate-and-evaluate-your-suppliers-and-vendors_pagen_2.html

7.2.1 Vendor Rating Techniques

As per modern vendor-buyer partnership approach, several tools and techniques are being
utilized by organizations to rate and evaluate performance of their vendors. The first move in
executing any of the techniques being used in vendor rating some attributes need to be well
thought-out. A firm should focus on the attributes that it finds most important. Some attributes
are easy to evaluate while others are not. A rule of thumb is to consider the total costs associated
with a purchased product/service, not exclusively the purchase price. Some of the metrics that
can be considered are:
 Correct quantity
 On-time delivery

 Price/cost of product
 Willingness to participate in your firm’s new product development and value analysis
 Willingness to share sensitive information
 Presence of certification or other documentation

 Quality level
 Service level
 Flexibility to respond to unexpected demand changes
 Communication skills/systems (phone, fax, e-mail, Internet)

 Use of Electronic Data Interchange (EDI)

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