VENDOR SELECTION
AND DEVELOPMENT
AQM
Faculty In-charge
Ms. SHIPRA SHARMA
DFT
Efforts By
PRASHANT TYAGI
PREYANSHU SOLANKI
DFT
SEM V
INTRODUCTION
The supplier/vendor selection is a decision-making problem
at the strategic management level that involves a semistructured process.
Two of the important responsibilities for the purchasing
Executive are :1. To select the right source of supply.
2. To develop new suppliers.
In other words, supplier selection and new source
development are major contributions of the purchasing
function and so should have properly planned approach.
A good supplier actively participates and helps the purchase to
meet his customers requirements.
Suppliers also contribute their specialized knowledge and help
build quality into the purchasing companys products.
VENDOR SELECTION ON THE BASIS OF
TRADITIONAL COMPETENCIES & NEW
COMPETENCIES
OLD COMPETENCIES
NEW COMPETENCIES
Price
Value
Lead Time
Service
Quality
Transactional Relation
Innovation & New Product
Development
Cycle time production
Bulk Order
Strategic Partnership
Design
Order Flexibility
The factors considered to evaluate
the functional aspects of Vendor
Selection
1. Cost Elements
2. Capacity
3. MOQs
4. Labor Skills & Equipments
5. Infrastructure
6. Quality
7. Distance
8. Government Regulations
9. Political/ Economic Environment
10. CSR/ Social Issues
11. Competition
12. Duty
13. Special Trade Agreements
Retailers are looking to work
differently with suppliers
Transactional
Relationships
Strategic
Long Term
Relationship
Many
Consolidate
Vendor
d Vendor
Relationship
Base
Commit to
s
Fragmented
large
Sourcing
volume
orders
Numerous
Sourcing
Greater operation
efficiency &full
package supplier
5 WAYS TO IMPROVE VENDOR
SELECTION
STEP 1
If purchasing directly from the manufacturer is
not possible due to an allocated lead time or
any reason, the first step should be obtaining
a copy of your independent distributors
Counterfeit Avoidance Plan.
Do not evaluate the effectiveness of a
counterfeit mitigation program unless it has
been written into the ISO procedure.
STEP 2
Create an in-house vendor rating system.
Rating systems can provide a quick and easy
snapshot of historical purchases.
Simultaneous evaluation of various vendors can
be done by comparing major parameters and
factors responsible for vendor selection.
The rating system quickly allows to
narrow the list down to the most reliable
and quality-driven sources.
STEP 3
Quality surveys are a beneficial tool in reviewing a
new suppliers capabilities.
They should be comprehensive enough to gain a good
understanding of a vendors strengths and
weaknesses.
It may be in a questionnaire format and focus on following
5 areas :
Procurement control,
Receiving and inspection control,
In-process inspection control,
Parts and component technical data, and
General quality controls.
STEP 4
Provide vendors with their score card.
Vendor score cards are not only used to measure a suppliers
effectiveness, but also allow the vendor to understand what
their score means and how to elevate their performance
and increase their score for the following quarter.
STEP 5
Create a concession form with your vendors, actually, the
vendors should offer this option first.
A concession form is utilized for high-level transparency,
allowing all key people to fully understand the aspects of parts
being procured and next steps for identifying the integrity of
that device.
Vendors that are unwilling to present a transparent
approach to such crucial sourcing requirements arent
the best fit for a secure supply chain and should be
considered for removal.
Vendor selection using a StrategyAligned FUZZY Approach
The majority of the existing approaches obtained
their optimal solutions without considering their fits
with the strategy of the firm.
This study utilizes the supplier positioning
matrix, modified from the product-process
change matrix, to link the capability of
suppliers with the requirements of the
customers to identify the strategy aligned
criteria for vendor selection
A fuzzy factor rating system is then used to
evaluate the potential vendors based on the type of
components required by the customers.
THE STRATEGY ALIGNED VENDOR
SELECTION CRITERIA
FUNDAMENTALS OF FUZZY SET THEORY
In this study, fuzzy opinions expressed by Decision Makers
are represented as triangular fuzzy numbers.
The reason of using triangular fuzzy numbers is because such
representations are easy to use.
Since linguistic variables are not directly mathematically
operable, to cope with this difficulty, each linguistic variable
is associated with a fuzzy number characterizing the
meaning of each generic verbal term.
In Fuzzy Set Theory, conversion scales are applied to
transform linguistic terms into fuzzy numbers.
TFNs Of Importance Weights and Ratings
CASE STUDY
A company X has dedicated its efforts since 1998 to develop
the computer peripherals products with innovative
ergonomic solutions as the foundation for computers. X
positions itself to be an ergonomic solution provider in the digital
multimedia industrial worldwide.
The products of company X include digital voice recorders,
jukeboxes, headsets, card readers, keyboards, mice, USB
hubs, screen filters, mouse pads, and etc. MP3 (MPEG1 Audio
Lyer3) players were the new and main projected products for
company X on 2005.
In the September of 2004, company X was looking for
relevant suppliers to implement this task. Only two semiassemblies of MP3 needed to be outsourced, i.e. electronics
and plastic injection semi-assemblies.
So in this Case Study, we illustrate the vendor selection
process of plastic injection semi-assembly as an example.
STEP 1
Management appoints a special committee responsible for selecting
the best supplier(s) for plastic injection semi-assemblies.
The committee consists of five officers from various functional
departments within the company, i.e., the manager of production
D1, the manager of engineering D2, the general manager of
marketing D3, the manager of purchasing D4, and the engineer
of research and development D5.
After the initial screening processes, 3 vendors are left for further
evaluation A1, A2, A3.
A1 - is the existing plastic component supplier of card readers.
A2 - is a new potential supplier having the manufacture/service history
in computers, communications, and consumer electronics.
A3 is also a new potential supplier having no relevant history in
industry, but having a good reputation in plastic injection and sequent
fabrication industries.
STEP 2
The importance weights of individual decision makers are assigned by the final decision
maker.
D1 = 1
D2 = 3
D3 = 1
D4 = 2
D5 = 2
Then, use linguistic weighting variables and their respective fuzzy numbers for decision makers
to assess the importance weights of the sub-criteria (table 2) and criteria (table 3).
Based on the assessment values, the fuzzy weights of individual sub-criteria and criteria can
then be computed by using tables 2 and 3.
STEP
3-
Compute
the defuzzified and normalized aggregated weight values of
individual subcriteria and criteria respectively (tables 2 and 3).
STEP
4-
Use
the linguistic rating variables (table 1) and their respective fuzzy numbers
for decision makers to assess the fuzzy ratings of the three alternatives with
respect to each sub-criteria, and then compute the aggregated fuzzy rating of
each subcriteria.
Table
4 presents the computed results of sub-criteria C11
STEP 5 Compute the aggregated fuzzy rating of each supplier-criteria
combination, and then, form the fuzzy rating matrix (table 5).
STEP 6
Compute the total fuzzy scores of individual suppliers (table
6).
Then compute the individual defuzzified values of these total
fuzzy scores.
The ranking order for the three alternative vendors is
A3, A1 and A2, hence the committee should identify A3
as the best vendor of plastic injection.
VENDOR DEVELOPMENT
The source development is important for import substitution, cost
reduction and quality improvement.
Source development needs are dependent on factors such as make or
buy decisions, amount of sub-contracting.
In some cases a buyer has to create a satisfactory supplier. Also if
existing suppliers cannot satisfy a companys needs, a logical
alternative is to attempt to develop a new supplier.
SMALL SUPPLIER DEVELOPMENT
It may be advantageous to encourage small firms so as to utilize the
services of the new entrepreneurs.
Small suppliers tend to need more assistance but purchasing
personnel who have to watch for and develop new suppliers find that
the small units are more responsive.
Here, the purchase of raw materials and sometimes consumable tools
at comparable prices for large consumers is a major problem.
VENDOR DEVELOPMENT
The sources of supply information are :
Catalogue
Trade Journals
Trade Directories
Newspaper Advertisements
Telephone directory
Government Publications
Publications of Institutions and Manufacturers
Association
Industrial Advertising including Direct Mail
Salesmans visits
Trade Exhibits and Technical Exhibitions
Industrial Product Finder
Some of the typical questions the buyers should be
posing when undertaking a vendor capability survey
are :
Will the vendor comply with the buyers quality standards and
procedures for items made to buyers design, and will produce
drawings on buyers format when he requests it?
What are the vendors inspection procedures and controls?
How frequently does he calibrate machines, production and test
equipment for meeting primary engineering standards?
What are his procedures of in-process inspection and quality
control?
What is his procedure for receiving inspection?
What is the nature of his planning, scheduling and inventory
control system?
Will he furnish price breakdowns by cost elements on fixed price
contracts?
Does he have any objection to contracting on other than a fixed
price basis?
REFERENCES
Apparel Merchandising.
Five Ways To Improve Supplier Selection
published article in SMT Magazine Feb 2013 by Chris
Torrioni.
Vendor Selection In a Modified Re-buy
Situation Using a Strategy-Aligned Fuzzy
Approach published in International Journal of
Production Research, Vol. 45, No. 14, 15 July 2007,
31133133.
Vendor Selection using Principal Component
Analysis by Petroni, Alberto, Braglia, Marcello,
published in Journal of Supply Chain Management;
Spring 2000; 36, 2; ABI/INFORM Complete, pg. 63
THANK
YOU
