The document discusses vendor evaluation, which involves assessing potential vendors through quantitative analysis. It outlines several methods of purchasing and vendor evaluation, including centralized vs decentralized purchasing. The document then provides an example evaluation of three cement vendors based on quality, price, and delivery metrics. Vendor S3 received the highest composite rating of 98.27 based on accepting 99% of orders, having the second lowest price, and missing only 2% of scheduled deliveries. The analysis demonstrates how a weighted scoring system can provide an objective means to evaluate vendors.

1. VENDOR EVALUATION
Under Guidence of:
Mr. Tirth D Patel
Assistant Prof.
Civil Engineering Dept.
UVPCE
Prepared By:
Rudra Desai 16014111004
Mikul Patel 16014111018
Vismay Shah 16014111028
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2. Content of
Presentation
• Types of Purchase
• Method of Purchase
• Vendor Evaluation
• Data Collection
• Data Analysis
• Conclusion
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3. INTRODUCTION
› Vendor evaluation is a term used in business and refers to the process of
evaluating and approving potential Vendors by quantitative assessment.
› The purpose of Vendor evaluation is to ensure a portfolio of best in class
Vendors is available for use. Vendor evaluation is also a process applied to
current Vendors in order to measure and monitor their performance for the
purposes of reducing costs, mitigating risk and driving continuous
improvement.
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4. PRINCIPLES OF PURCHASE
Right
Quality
Rigth Quantity
Rigth
Time
Rigth
Price
Rigth
Place
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5. TYPES OF PURCHASING
1.Centralized Purchasing
› Under centralised purchasing purchases are made at one central point for the whole
organisation and material is issued to respective departments or jobs as and when
needed. Centralised purchasing is suitable in cases where the organisation runs one
plant. It will bring about economies of purchasing and buying in small lots will be
avoided.
› It ensures consistent buying policies in future and purchasing powers are
concentrated in the hands of one person, the in charge of purchasing department.
› The most important benefit which can be drawn from centralised buying is that it
keeps the inventories in control and checks the wasteful investment in materials and
equipment etc. thereby ensuring overall economy in purchasing. 5

6. Continue…
› It also ensures bulk buying which ensures favourable prices. The staff requirements
under this type are limited and specialists in buying may be appointed. Centralised
purchasing is further helpful to the vendors since their selling costs are reduced as
they can easily co-ordinate and supply goods to a single buyer instead of large
number of buyers.
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7. TYPES OF PURCHASING
1.Decentralized Purchasing
› Decentralised purchasing is just the reverse of centralised purchasing. This is
suitable in organisations running more than one plant. Under this type each plant has
its own purchasing agents. In other words, every department makes its own
purchases. This is also called localized purchasing.
› Decentralised purchasing is quite flexible and can be quickly adjusted in accordance
with the requirements of a particular plant. More attention can be paid by the
departmental head on buying problems as he will be carrying limited number of
activities in his department and he can be held responsible for the purchase of
goods and the overall performance of the plant.
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8. Continue…
› The serious drawback which emerges from this type is the lack of uniformity in
purchasing procedure in the organisation. At the same time uniformity in prices
cannot be ensured and moreover every departmental head may not possess the
calibre of an expert buyer.
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9. PURCHASE PARAMETERS
Purchase
Parameters
SWOT
Analysis
Right
Materi
al Right
Qualit
y
Right
Quantit
y EOQ
Right
Attitud
e
Right
Price
Right
Time
Right
Transportat
ion
Right
Contract
s
Right
Source
Right
Place of
Delivery
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10. METHODS OF PURCHASING
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• Hand to mouth purchasing
• Forward purchasing
• Speculative purchasing
• Hedging
• Reciprocal purchasing
• Concentrated purchasing
• Diversified purchasing
• Tender buying.

11. EVALUATING SUPPPIER PERFORMANCE
1.Categorical System
› In this method, the buyer chooses attributes that are most important to its particular
situation. The buyer assigns either a preferred (+), unsatisfactory (-), or neutral (O)
rating for each of the selected attributes to every vendor.
› Then the ratings are totalled for each vendor. For example, ratings resulting in
scores of two preferred (++), one unsatisfactory (-), and one neutral (O) would total
one positive (+). A comparison of total scores reveals the highest rated vendor. The
representatives of the involved divisions agree upon the ratings (Hillman, 1993).
› Categorical supplier measurement is the easiest method to implement but suffers
from subjectivity.
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12. › It does not provide a detailed insight into the supplier’s true performance because
the attributes being measured are weighted equally. Also, because the
representatives of the involved divisions assign the ratings, this method relies on an
individual’s perception about performance and not on quantitative data.
2. Weighted Point Method
› In the weighted-point method, the relevant attributes are chosen and each are
assigned a weight depending on the importance to the overall performance. The firm
reaches a consensus on weight assignments to prevent or minimize subjectivity.
› The weight for each performance category is then multiplied by the performance
score that is assigned to it. Finally, these products are totalled to determine a final
rating for each supplier. 12

13. › Firms often use the weighted point system because it is highly reliable and its
implementation costs are moderate. In addition, it combines qualitative and
quantitative performance factors into a common system.
› Because users can change the weights assigned to each performance category, or
change the performance categories themselves depending on the strategic priorities
of the firm, the system is flexible.
› The weighted-point method overcomes the subjectivity of the categorical system,
but it has some drawbacks. It requires the buyer to specify the value of one
performance measure relative to another, which is often difficult in practice.
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14. 3. Cost – Based System
› Using the cost-based system, a buyer is able to quantify the additional costs incurred
if a supplier fails to perform as expected. The total cost of doing business with the
supplier can be calculated by the supplier performance index (SPI).
› This index is calculated for each item or commodity provided by the supplier and has
a base value of 1.
› It is represented by the following formula: SPI = (Purchase Price + Non-performance
Cost) / (Purchase Price).
› As derived from the equation, the closer SPI is to 1, the better the supplier. Non-costs
should include qualitative factors.
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15. Data Collection
› The Data collection is done for the cement, any three vendors are selected
for the Data collected. Most commonly known factor are quality, delivery,
price and services. Each factor is assigned a weight which varies from
vendor to vendor, depending upon the buyer’s judgment about the
importance of the factor.
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16. List of Vendors Selected
V
E
N
D
O
R
S
LIST
S1 – Nirmax Cement
Ambica Traders
S2 – J.K Laxmi Cement
Umiya Traders
S3 – Wonder Cement
Mahalaxmi Traders 16

17. The rejection of the material are less because the data is collected in summer season, hence in the winter season there are more chances of
getting more bags of cement rejected.
Supplier Inspection Analysis Price Analysis Price Analysis
Lots Received Lots Accepted Basic Price (Rs.
Per Bag)
Discount (%) Transport Deliveries
missed (%)
S1
Nirmax
1000 990 243 3 0 10
S2 J.K
Laxmi
1000 993 252 0 0 6
S3
Wonder
1000 985 245 2 0 2
Quality factor (%) = 40
Price Factor (%) = 35
Delivery factor (%) = 25
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18. DATA ANALYSIS
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19. 1. QUALITY RATING
Quality rating is measured in terms of percentage of lots accepted.
QUALITY RATING = Proportion of lots accepted x Quality factor weight in percentage.
100
Supplier No. of lots
received
Lots accepted Proportion % of lots
accepted
Factor Weight Quality Rating
1 2 3 4 5 6 = (4 x 5)/100
S1 –
Nirmax
1000 990 99 40 39.6
S2 – JK
Laxmi
1000 993 99.3 40 39.72
S3 –
Wonder
1000 985 98.5 40 39.4
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20. 2. PRICE RATING
Price performance is measured in terms of percentage of lowest price to the price paid
PRICE RATING = Lowest price x Price factor weight in percentage
Price paid
Supplier Unit Price
(Rs.)
Discount
(%)
Basic
Price
(Rs.)
Transport
ation
charges
Net
Price
Lowest
price
7 AS % OF 6 Factor
Weight
Price rating
1 2 3 4 5 6 7 8=7/6 9 10=8*9/100
S1 –
Nirmax
243 3 235.71 0 235.7 235.7 100 35 35
S2 – JK
Laxmi
252 0 252 0 252 235.7 93.73 35 32.73
S3 –
Wonder
245 2 240.1 0 240.1 235.7 98.2125 35 34.37
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21. 3. DELIVERY RATING
Delivery performance is measured in terms of proportion of the performance promises fulfilled.
Delivery rating= Proportion of commitments kept up x Services factor weight percentage
Supplier % Deliveries
missed
Proportion of promises kept Factor Weight Delivery Rating
1 2 3 4 5=(3*4)/100
S1 – Nirmax 10 90 25 22.5
S2 – JK Laxmi 6 94 25 23.5
S3 – Wonder 2 98 25 24.5
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22. 4. COMPOSITE RATING
Composite rating is the aggregate of quality rating, price rating and delivery rating.
COMPOSITE RATING
Supplier Individual Rating Composite rating
Quality rating Price rating Delivery rating
S1 – Nirmax 39.6 35 22.5 97.1
S2 – JK Laxmi 39.72 32.73 23.5 95.95
S3 – Wonder 39.4 34.75 24.5 98.27
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23. S3
Acceptance and the non-acceptance norms are then
fixed which are applied to the composite rating. The
acceptance norms generally vary from vendor to
vendor, depending upon their needs.
Category Range
A 91-100
B 81-90
C 71-80
D 61-70
E 51-60
is preferred because it has a highest
rating.
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24. CONCLUSION
In concluding part, we come to know that
by proper Vendor Evaluation we could
select the Best and Appropriate vendor
for the particular material. It prevents us
to become subjective towards one criteria
of selection.
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25. REFERENCES
1. Material Management Text and Case BY
A.K.CHITALE & R.C. GUPTA
2. Empire Skylark
3. http://www.yourarticlelibrary.com/material-
management/types-of-material-purchasing-in-
an-organisation-centralised-and-
decentralised/26123/
4. https://scm.ncsu.edu/scm-
articles/article/performance-measurements-
and-metrics-an-analysis-of-supplier-evaluation
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26. Thank you very much
for your time
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