Operations Management Unit 5 Purchasing

Supplier Selection and Evaluation Select supplier and reach agreement Determine method of supplier evaluation and selection Limit suppliers in selection pool Identify potential supply sources Determine sourcing strategy Identify key sourcing requirements Recognize the need for supplier selection 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing

Evaluation and Selection Decisions During new product development Due to poor existing supplier performance At the end of an existing contract Buying new equipment Expanding into new markets or product lines Receiving internal user requisitions 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing

Evaluation and Selection Decisions Performing market tests Facing countertrade requirements During outsourcing analysis Consolidating volumes Conducting a reverse auction When current suppliers have insufficient capacity Reducing supply base size 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing

Identify Key Sourcing Requirements May be determined by internal and external customers Supplier quality Cost Delivery performance Other Vary widely from item to item 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing

Determine Sourcing Strategy Single vs. multiple sourcing Short-term vs. long-term contracts Design support vs. operational support Full-service vs. non-full-service suppliers Domestic vs. foreign-based suppliers Collaboration vs. arm’s length relationship 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing

Identify Potential Sources How well existing suppliers can satisfy cost, quality, and/or other performance objectives Strategic importance of purchase requirement Technical complexity of purchase requirement 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing

Sources of Information Current suppliers Preferred suppliers Sales representatives Information databases Experience Trade journals Trade directories Trade shows Second-party or indirect information Internal sources Internet searches 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing

Limit Suppliers in Selection Pool By using Vendor rating (Rating factors) 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing

Method of Evaluation and Selection Evaluation from supplier-provided information Supplier visits Use of preferred suppliers External or third-party information 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing

V.Prabakaran, AP/MBA - Unit 5 - Purchasing Vendor rating It is very difficult to identify the good vendors Purchase department quality – vendor selection An accurate vendor can be come an asset to a company – leads to increase in sales 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing

V.Prabakaran, AP/MBA - Unit 5 - Purchasing Rating techniques Price Discount received Timely delivery Freight & delivery charges Service & installation cost Credit terms & employee training Cost reduction suggestions Inventory plans & financial positions, etc 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing

Techniques of vendor rating Categorical plan – personnel from various division maintain informal evaluation records The weighted point plan – A / B / C classification Critical incidents methods – record of events and occurrences related to the buyer – vendor relationship is maintained in each vendor’s file Checklist system 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing

V.Prabakaran, AP/MBA - Unit 5 - Purchasing Check list Reliability Technical capabilities After sales service Availability Buying convenience Sales assistance 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing

V.Prabakaran, AP/MBA - Unit 5 - Purchasing Thanks.. 01/04/2017 V.Prabakaran, AP/MBA - Unit 5 - Purchasing