The document discusses the importance of the vendor selection process for organizations. It outlines the key steps in the supplier selection process, including evaluating needs, gathering a pool of vendors, interviewing vendors, and selecting an evaluation method. Several supplier evaluation criteria are examined, such as financial health, expertise, and risk factors. Finally, the document describes different supplier evaluation methods like the categorical method, weighted point method, and cost-ratio method and provides an example problem demonstrating the weighted point method.

1. VENDORS Evaluation and Selection
By
Shashank Soni
13MT07IND016

2.  Importance of Supplier Selection
 Supplier Selection Process
 Benefits of Supplier Selection Process
 Supplier Evaluation Criterias
 Supplier Evaluation Methods
 EXAMPLE PROBLEM
 CONCLUSION

3.  One of the most important processes performed in
organizations today is the evaluation, selection and
continuous measurement of suppliers.
 Selecting a vendor is now as important a process as
developing new products.

4.  Supplier selection process is a multi-criteria problem, which
includes both qualitative and quantitative factors.
 Relatively small cost reductions gained in the acquisition of
materials can have a greater impact on profits.
A sound supplier selection decision today can reduce a
host of problems tomorrow

5. Steps in Supplier Selection Process
 Evaluating Needs and Defining Objectives
 Gathering a Limited Pool of Vendors
 Interviewing with Vendors
 Selecting and Applying the Method

6.  What need you are looking to satisfy?
Increase product quality
 Which evaluation categories you will use?
 What are your business, technical and usability requirements?
 What are the must requirements?
Max price, min performance, etc
 How will you score the requirements?

7.  Evaluating all potential vendors takes much
time
 Basic screening and elimination due to lack
of must requirements

8.  One by one interview with vendors
 Gap analysis between your requirements,
objectives and vendor properties
 Scoring each criteria

9.  Helping minimize subjectivity in judgment
and make it possible to consider all relevant
criteria in assessing suppliers.
 Providing feedback from all areas in one
package.
 Facilitating better communication with
vendors.
 Providing overall control of the vendor base.
 Requiring specific action to correct
identified performance weaknesses.

10.  The evaluation criterias are fundamental to choose the
best supplier. They are specific to each firm, because
they vary according to the needs.
 The criteria exposed are the most common ones.
 Six categories of criteria selected

11. The six classes for the suppliers’evaluation
Measurement:
 FINANCIAL HEALTH
 EXPERTISE
 OPERATIONAL PERFORMANCE METRICS
 BUSINESS PROCESSES & PRACTICES
 ENABLING BEHAVIORS OR CULTURAL
FACTORS
 RISK FACTORS

12. Select one among various methods
 THE CATEGORICAL METHOD
 THE WEIGHTED POINT METHOD
 THE COST-RATIO METHOD
Calculate overall vendor score using selected
method
Select the vendor with best score

13.  Basically, it is a procedure whereby the buyer relies on a
historical record of supplier performance.
 Initially, a list of evaluation criteria is identified.
 The buyer then assigns a grade to each supplier, for
each criterion, based on past experience.
 A simple marking system of plus, minus, and neutral
grades may be used.
 Evaluation lists are often provided to other departments
involved, such as quality control, engineering,
production, and receiving

14.  Vendors with composite high or low ratings are noted, and
future supply decisions are influenced by them.
 Although this system is non-quantitative, it is a means of
keeping systematic records of performance.
 It is also inexpensive and requires a minimum of performance
data.
 However, the process relies heavily on the memory and
judgment of the individuals providing the ratings, and the
ratings may become routinely performed without much
critical thought

15.  Weighted-point method quantifies the evaluation criteria.
 A number of evaluation factors can be included, and their relative
weights can be expressed in numerical terms so that a composite
performance index can be determined and supplier comparisons
made.
 For example, following evaluation criteria have been chosen:
quality of shipments, accuracy of delivery, and price.
 Assuming that quality and delivery are the most significant, a point
rating system such as the following might be used:
quality, 40 points; delivery, 40 points, and price, 20
points.

16.  The cost-ratio method relates all identifiable purchasing
costs to the value of the shipments received from the
respective suppliers.
 The higher the ratio of costs to shipments, the lower the
rating for that supplier.
 What cost categories are used depends on the products
involved.
 Quality, delivery, service, and price are the overall
categories, and respective costs are accumulated for each.

17.  For example, costs associated with quality normally
include
 the costs of unusual visits to a vendor's plants,
 unusual inspection costs of incoming shipments, and
 all costs associated with defective products,
including rejected parts and the resulting
manufacturing losses.

18. This study was conducted by a light engineering industry X on pressure
die-casting ancillaries supplying common parts situated near the
location of X. The study aimed to find the best out of the four vendors
K, L, M and N.. Criteria for evaluation were cost, quality, schedule
adherence, system adaptability and general cooperation

19. weight Supplier k Supplier l Supplier m Supplier n
Quality 0.35 3 4 2 1
Price 0.15 1 2 4 3
Service 0.25 2 1 3 4
delivery 0.25 4 2 1 3

20. Similarly…
Supplier k 2.7
Supplier l 2.45
Supplier m 2.3
Supplier n 2.55
Result – According to the previous results, the higher weight belongs to
supplier k,and is judge to be the best overall

21. THANK YOU