Chapter 7

Question 1

Supplier selection process
(RIIDLCES)

Answer 1

1. Recognize the need for supplier selection
2. Identify key sourcing requirements
3. Identify potential supply sources
4. Determine sourcing strategy
5. Limit suppliers in the selection pool
6. Conduct a detailed review of supplier
7. Select suppliers and reach agreement

Question 2

Recognize the need for supplier selection

Answer 2

Purchasers will encounter new, modified of straight rebuy purchasing situations when making sourcing decisions

New task
This occurs when buying a completely new product from an unknown supplier
It is filled with uncertainty and risk

Modified rebuy
Occurs when you purchase an existing product from an unknown supplier or a new product from a known supplier

Straight rebuy
Occurs when you are buying an existing products from a known supplier

Question 3

Stage 2: identify key sourcing requirements

Answer 3

“What are we looking for in a supplier?”

Requirements will be based on internal and internal customers with the value chain

Evaluation will be based on
-cost
-quality
-delivery performance

The degree in which a suppliers search for information may include how well radiating suppliers can status cost, quality and delivery

Consider low or high capability of current suppliers + low or high strategic importance if requirements in the effort and intensity of search required during evaluations

Question 4

Step 3: identify potential supply sources

Answer 4

Entry qualifiers

-buyers may request information directly from supplier and use the information to screen suppliers

-information requested may be based supplier cost structure, quality, delivery performance, market share, process technology, etc.

Suppliers must posses basic components before meeting the phase of evaluation:
-adequate facility
-skilled professionals and technical stuff
-proven manufacturing or service capability
-capable and supportive management

Question 5

Stage 4: Determine sourcing strategy

Answer 5

Issues to be considered to achieve an effective source selection process

Size of relationship
-if a buyer has a small part of the business they should get less attention

Risk/ reward
-buy from suppliers who are profitable and growing and present to a low risk

Sustainability and diversity objective
-work with suppliers that commit to corporate citizenship and sustainable practice

Competitors as suppliers
- buyers can buy directly from competition

Offshore and international suppliers
-it is difficult to apply JIt systems with international suppliers due to longer lead times

Question 6

Stage 5: limit the supplier selection pool

Answer 6

Ways to reduce the supplier list:
-supplier visit
-evaluation on supplier performance
-evaluation of 3rd party information
-risk assessment

Supplier visit - the best way to see suppliers operations and determine fitness of the supplier

Evaluation of supplier’s previous performance- for existing suppliers who have performance record with the buyer

Evaluation of third party information- buyer can request information from third party providers and use information to screen suppliers

Risk assessment
•financial risk management- monitoring the strength of a supplier’s financial condition
•operational risk management- these are the human intellectual and physical capital to meet buyer’s requirements

Question 7

Stage 6: conduct a detailed review of supplier evaluation criteria

Answer 7

Once an initial cut has been done, buyer must decide how to evaluate the remaining suppliers and the following are ways to evaluate and select remaining suppliers in the pool

Key criteria to evaluate suppliers
(PMPFETECSS)

Primary - cost, price and delivery
Management capability
Employee capability
Cost structure
Totally quality performance systems
Process and technology capabilities
Sustainability and environmental compliance
Financial stability
E-commerce capability
Suppliers sourcing strategies

Question 8

Stage 7: select suppliers and reach agreement

Answer 8

The final step of the evaluation and selection process is to decide the supplier as reach a contract agreement

For routine items just notify and ward a purchase contract to a supplier

For complex process buyer and supplier to conduct a detailed negotiations on specific of a purchase agreement

Developing a quantitative supplier evaluation of survey should:
-be comprehensive and include important performance categories
-be objective as possible>use if scoring system defining value on measure scale
-include a reliable items and measurements scales
-be flexible
-be mathematically straightforward and simple to understand