The document provides guidance on evaluating suppliers for a sourcing case. It outlines conducting a total cost of ownership analysis to compare suppliers on cost dimensions like price, quality and transportation. It describes a structured supplier evaluation process that identifies evaluation categories, assigns weights, evaluates suppliers, and selects a supplier. It also emphasizes managing risks through the supplier selection process by evaluating supplier characteristics like management capability, quality systems, and financial strength.
2. Case Documents
Case Documents
• Supplier Evaluation and Selection Case Instructions
• Bid Summary & Total Cost of Ownership (TCO) Worksheet
• Supplier Evaluation Spreadsheet
• Sourcing Risk Management Plan
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3. Case Prep
TCO Analysis
• Utilize the in-class exercise as a guide
• Quality
• Inventory
• Transportation
• Late Delivery
• Make sure to get the correct unit of measure ($/Unit)
The TCO analysis will compare each supplier across multiple cost
dimensions (price, quality, inventory, shipping, etc.) and provide
an “apples to apples” comparison on a $/Unit basis.
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4. Case Prep
Supplier Evaluation Process
Step 1: Identify RFP supplier evaluation categories
Step 2: Assign a weight to each RFP evaluation category
Step 3: Identify and weigh subcategories
Step 4: Define a scoring system for categories and subcategories
Step 5: Evaluate Supplier
Step 6: Review evaluation results and make selection decision
Step 7: Review and improve supplier performance on an on-going basis
The supplier evaluation should follow a structured approach, be
comprehensive, include performance categories considered
important to the evaluation / selection process, and be objective.
Use the case information, including site visits, and bid summary.
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5. Case Prep
Supplier Evaluation Example
Characteristics of a supplier evaluation survey include: items and
measure scales are reliable, mathematically straightforward, and
the survey is flexible across different types of purchasing
requirements.
Notes: You calculate Weighted Score by taking the (Score / 5) x Sub weight
Weights must add up to 100 and sub-weights add up to the parent weight.
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Initial Supplier Evaluation
Supplier: Company ABC
Category Weight Subweight Score (0-5) Weighted Score Total
1. Quality Systems 20
Process Control Systems 5 4 4.0
Total Quality Commitment 8 4 6.4
PPM Defects 7 5 7.0
17.4
2. Management Capability 10 5 4 4.0
Management…. 5 4 4.0
…….
Total Weighted Score 80.6
6. Case Prep
Risk Management
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• Management capability
• Total quality management
• Technical capability / R&D focus
• Operations & scheduling
capability
• Financial strength
• Systems capability
• Delivery capability / performance
A good risk management program starts early in the supplier
selection phase. The purpose is to gain insights into potential risk
areas to reduce the probability of supplier financial and
operational challenges disrupting your business.
• Certifications (ex. ISO)
• Types of inventory systems / practices
• Environmental practices
• Union employee contract expiration
dates
• Capacity
• Caliber of personnel
• Evidence of good management &
housekeeping practices
Key Evaluation Criteria Examples