The document discusses the importance of vendor rating as a tool for ensuring quality in supply chain management and improving operational performance. It highlights the evolution of procurement strategies beyond just cost to include quality and service delivery, and outlines various methods for assessing vendor performance. Additionally, it emphasizes the need for organizations to adopt a structured approach to vendor evaluation to enhance overall supply chain effectiveness.

1. Vendor Rating: A Tool for Quality
in Supply Chain Management
Presenter:
Chandrmouli Singh
MBA (AB) II Year

2. Overview
 Introduction
 Objectives
 Methods
 Vendor rating: Industrial process
 Observations
 Deming’s fourth point
 Conclusion
 References

3. Introduction
 Price was considered primary base for procurement
decisions, and business contracts were awarded to the
lowest bidder in 1980s
 Vendor rating is a tool
 Insures quality in the supply chain
 Supplier quality management is essential for improved
operational performance

4.  Origin: To improve the overall performance, many firms
are focusing on their
core
competencies
and
outsourcing non-core activities
Specifying
Communicating
Dynamic
monitoring

5.  Increased outsourcing: increased the reliance of buyers on
their suppliers
 Need for effectively managing supplier performance
capabilities
 Strategy for improvement

6. Purchasing objectives
Quality
Place
Quantity
7
Rights
Service
Source
Time
Price

7.  Capability and selection of vendor, report of the visiting
team and analysis of vendor questionnaire is used
 A tools for benchmarking their supplier’s performance

8. Objectives
 The system for assessing the performance of one vendor in
comparison with others
 To reduce large amount of data into manageable
information for decision making and to identify future
trends

9. Functions
 Provide objective, qualified measures of supplier’s
performance
 Aid in arriving at a balanced judgment of supplier’s
performance for all categories of buyer needs
 Provide both buyer and supplier with common factual
information on overall performance
 Minimize the risk of being stampeded by isolated
instances of failure
 Provide the supplier with a detailed and factual record
of problems for corrective action

10.  Enhance the relationship between the customer and the
supplier
 Draw a comparative scale that can be used for
vendor selection and distribution of the requirements
 Update quality plan to most economic levels either by
increasing or decreasing amount of inspection
 Discontinue the vendor in case of consistently poor rating
 Improve effectiveness of supply chain management

11. Methods
 Categorical plan
 Weighted point plan
 Cost ratio plan

12. Vendor Rating: Industry Practices
 Based on data provided by 33 organization
 In sample 24 were using weighted plan and rest 9 were
using categorical plan
Comparison of Elements and their Weightages
S. No.
Element
% Weightage – Industries
%
30-40
No. of
Organizati
ons Using
Element
24
35
0
Weightage –
Authors
(Range)
1.
Quality
2.
Cost
3.
Delivery
4.
Service
25-30
Range
Mean
40-100
66.875
–
Standard
Deviation
19.77
–
–
19
20-60
37.894
11.219
05
10-20
13.333
5.773

13. Weightages for Sub-Elements – Quality
Sub-Elements
(Quality)
No. of
Maximum
Organizations Weight (%)
Minimum
Weight (%)
Mean
Standard
Deviation
Quantity accepted
19
1.00
1.00
1.0
0
Quantity accepted with
deviation
10
0.75
0.25
0.6
0.184
Segregated and accepted
quantity
6
0.95
0.75
0.8
0.077
Segregated,
reworked and
accepted quantity
10
1.00
0.25
0.6
0.200
Quantity rejected
12
0
0
0
0

14. Weightages for Sub-Elements – Delivery
Sub-Elements
(Delivery)
No. of
Organizations
Maximum
Weightage (%)
On-time delivery
13
1
0.4
0.82
0.273
5
1
0.5
0.67
0.288
Quantity reliability
Minimum
Average
Weightage (%)
Standard
Deviation

15. Observations
 Five organizations have rated the vendors based on quality
performance alone
 Some of them have had mentioning of technology and
innovation. It subtly stresses that
companies are also
assessing vendors based on technology transition to predecide further scope of work to be outsourced. One
organization has also mentioned third party certification and
Production Part Approval Process (PPAP).
 Two organizations have awarded weightage criteria based on
criticality of repair and rework (major/minor/critical), this is in
line with IS: 12040-1987 guidelines
 One organization adjusts the rating when the supplies are
modified and are used for alternative applications
 Two organizations have been assessing multiple item
suppliers based on individual items rating leading to overall
supplier rating

16.  Work stoppage incidents have been separately identified
for rejected components and for delayed deliveries
 Only one organization has considered line rejections
 One organization has been calculating overall vendor
rating by considering previous months performance
 There is an isolated instance where there is a mention of
cost of quality
 There are also separate instances of considering
customer
disruptions and special status customer
notification as a criterion for vendor rating
 The 90% performance or rating levels can be reasonably
assumed excellent

17. Deming’s fourth point
 Stop awarding business based on price tag alone (Deming,
1986)
 customer satisfaction is closely linked with consistently
supplying quality as per schedule
 Very few organizations have considered work stoppage
incidents, service performance, line rejection, criticality of
components and multiple component supplies
 Electronic data processing systems may ease the work, but
it also will be limited to the compatibility and capability to
support the rating system

18. Conclusion
 Vendor rating is an important defect prevention tool to be
used on the upstream (supply side) supply chain
 It should be developed logically to suit the organizational
requirements
 Companies should emphasize the importance of quality
and delivery performance not only to their suppliers, but
also to their (supplier’s) suppliers
 Weightages recognized during study would help
organizations to understand the explicit and implied
requirements of their customers and decide the priorities
to develop the strategies for improvement in their vendor
rating

19. Reference
Mandave, H. A., Khodke, P. M., (2010). Vendor Rating: A
Tool for Quality in Supply Chain Management. The IUP
Journal of Supply Chain Management, VII(3)

20. Thank you....
Welcome for your Queries

21. Weighted point plan
Weightages Given by Authors (%)
Vendor Rating
Elements
Juran and Gryna
(1996)
Feigenbaum
(1991)
Sinha et al. (1985)
Quality
40
40
30
Cost
35
35
40
Service and
Delivery
25
25
30