1. Chapter 41 Chapter 7 Supplier Selection and Evaluation

2. 2 Contexts for supplier evaluation and selection Reacting to a submitted requirement Proactive in early product development activity Proactive in developing preferred suppliers Insourcing/outsourcing decision analysis

3. 3 The degree to which buyers search for new sourcing information Strategic Importance of Requirement LowHigh Capability of Current Supplier Low High Minor to moderate information search Major search efforts Minor information search

4. 4 Supplier Evaluation and Selection Steps involved...

5. 5 Step 1. Identify and seek out information on potential suppliers Current suppliers designated as a preferred supplier Sales representatives Internal databases on suppliers including supplier literature Trade magazines

6. 6 Step 1. Identify and seek out information on potential suppliers Internal users Trade shows Internet sources Trade directory: Thomasnet.com B2BYellowPages.com Web sites of individual companies Purchasing colleagues

7. 7 Step 2. A First Cut on identified potential suppliers Suggested screening process Evaluation of survey information submitted by suppliers Financial ratios

8. 8 Typical areas for supplier surveys 1.Brief business history 2.Key managers and their professional histories 3.Major customers and references 4.Questions on manufacturing capabilities and capacity, process technologies, and quality control 5.Financial condition and ratios 6.Labor climate and labor relations

9. 9 Step 3. Detailed evaluations on suppliers making the first cut Further examination of the survey information Another RFI Dun & Bradstreet Supplier Qualification Reports Contact former customers Site visits Prearrangements with supplier CFT Agenda

10. 10 Step 4. Select supplier(s) Key evaluation criteria Process and technology capability Commitment to R&D and continuous improvement Total Quality Management Management capabilities and potential for forging a relationship Labor Climate Cost Issues Financial Stability Supplier’s Supply Management Capabilities

11. 11 Developing a formal supplier evaluation instrument Necessary characteristics 1.Incorporates a formal numeric scoring system 2.Reflects the performance categories important to the particular sourcing area 3.Flexible and adaptable for different supplier evaluation situations

12. 12 Developing a formal supplier evaluation instrument: The Steps 1. Identify the categories of evaluation 2. Assign a weight to each evaluation category 3. Identify and weight subcategories as appropriate. 4. Set-up a scoring scale

13. 13 Using the evaluation instrument Do a site visit and evaluate the supplier—resulting in a score Use the results to pre-qualify suppliers or award contacts, or to identify improvement opportunities Issue of Deficiencies as compared to Performance Problems

14. 14 Miscellaneous supplier selection issues Local sources MBE Issues Size relatives Using a manufacturer vs. distributor Countertrade impositions Using foreign suppliers

15. 15 Let’s move on