The Art of Decision-Making: Navigating Complexity and Uncertainty
Section 03 Supplier Selection
1. supplier
selection
01
market conditions
different conditions, supplier
lists and reasons to scout
03
supplier evaluation
different techniques to qualify
and evaluate suppliers
02
supply chain conditions
conditions of supply chain
based on different criteria
04
supplier selection
criteria to be considered while
selecting suppliers
2. market
conditions
sole source
concerned supplier is the ‘one and only source’ for the product
single source
concerned supplier is not the only source but your preferred source
oligopoly
interdependent or highly competitive market with similar pricing
3. supplier
listing
qualified suppliers
central repository of suppliers qualified based on certain criteria
supplier details
basic details of products, services, capabilities and infrastructure
ratings
remarks and ratings based on experience from previous association
4. reasons to
scout suppliers
new item
goods or service that have not
been procured previously
price
better prices from suppliers with
higher efficiency owing to scale
bad experience
poor delivery or default from any
existing supplier
increased requirement
additional quantity is beyond the
capacity of current suppliers
lead time
shorter lead time with location or
quicker process of supplier
explore options
explore or keep options ready in
case of switch required
6. based on
location
local
within the city, region or same local legislation
domestic
within the same country but different region or legislation
international
overseas or cross border supplier from different country
7. based on
layers
direct
straight from producer with no intermediate agent
shallow
from seller with an intermediate agent or dealer
extensive
through last mile provider procuring through several layers
8. impact on
logistics
transport mode
medium of transport such as sea,
air, road or rail
statutory
compliances and paper to be
submitted to legislative authorities
cost
cumulative cost of procurement
with direct and indirect costs
lead time
cumulative lead time subject to
transport and compliances
taxation
applicable taxes and input credit
structure based on legislations
supply risk
disruption or interruption chances
from uncertain events like weather
11. oil & gas
note
upstream
onshore and offshore oil rigs from where raw crude oil is extracted
mid-stream
transport and intermediate storage of crude oil for processing
downstream
refining to products like fuel, lubricants, wax and chemicals
13. supplier
screening
establish grade
filter out and prevent suppliers
below a certain grade
pre-qualification criteria
qualify suppliers beforehand to
participate in the bidding
minimum baseline
establish a status quo of suppliers
at certain fronts
non-critical items
can be used as standalone tool
for non-critical items
14. supplier
scoring
set total marks
filter out and prevent suppliers
below a certain grade
marks for each factor
divide the total marks by the
number of factors
set factors
for instance, revenue, previous
experience, quality certifications,
after sales, brand value, location,
lead time, warranty..
rate and sum
rate supplier on each parameter
and sum up the score
15. weighted
scoring
set total marks
filter out and prevent suppliers
below a certain grade
marks for each factor
divide the total marks by the
number of factors
set factors
for instance, revenue, previous
experience, quality certifications,
after sales, brand value, location,
lead time, warranty..
rate
rate supplier on each parameter
independently
factor weightage
assign weightage to each factor
based on the context and item
sum product
multiply scores with respective
weightage and then sum up
16. normal vs weighed
scoring
Max
Marks
Score Average
Scoring
Weightage
Factor
Weighted
Scoring
Cost 20 20 20 5% 5
Lead Time 20 15 15 20% 15
Warranty 20 15 15 30% 22.5
Quality 20 15 15 40% 30
Service 20 15 15 5% 3.75
Total 100 80 80 100% 76.25
17. summary
of techniques
screening
preliminary screen to filter out suppliers based on certain
qualification criteria
scoring
assigning score to suppliers based on various parameters
weighted scoring
laying emphasis on more important parameters in scoring
18. selection
criterion
comprehensive list of factors
factors ranging from technical to financial to be considered
important and complex contracts
small procurements may not necessitate use of all factors
use only most appropriate factors
based on item and context one should consider certain factors
20. selection
criterion
03 financial capacity
funds management
• Revenue
• Average order value
• Highest single order value
04 past-experience
preparedness
• Learning curve
• Available formats
• SOPs (Standard Operating
Procedures)
21. selection
criterion
05 past client references
recommendations
• Recommendations
• Repeat orders
• Duration of association
06 rights and license
intellectual property
• Transfer of rights
• Ownership of IP
• Use license of IP
• Limited use license of IP
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