THE IMPORTANCE OF SELECTION AND EVALUATION OF THE SUPPLIER IN PURCHASING MANAGEMENT Bruno Zavrnik1 Received: 13. 03. 1998.

Accepted: 22. 10. 1998. Preliminary communication UDC:

This paper demonstrates how important purchasing management is today because the profit potential of effective management of the purchasing and supply activities is enormous compared with other practical management alternatives. The procurement process has many major tasks. One of the most crucial is the selection of the right supplier. The right supplier provides the right quality of materials, on time, at the right price, and the right level of service. Any purchasing is only as good as the sources (suppliers that it buys from. !urchasing managers can choose different purchasing and sourcing strategies, which help them to make the best decision. "n today#s global market, more and more companies become dependant on suppliers from abroad. The motives for buying abroad can range from quality to cost. "n the implementation of international procurement, purchasing has to engage in the customary tasks of the supplier#s identification, evaluation and selection. The evaluation of actual and potential sources is a continuing process in the purchase department and must be done at least once a year. 1 INTRODUCTION Today mo!t "irm! #ould a$ree t%at t%e purc%a!in$ "unction !%ould &e an inte$ral part o" t%e operation o" t%e enterpri!e. All t%e "unction! o" a &u!ine!! mu!t me!% into a uni"ied #%ole i" mana$ement i! to "ul"il it! &a!ic re!pon!i&ility o" optimi!in$ company pro"it. 'ac% "unction mu!t !%oulder it! portion o" t%i! re!pon!i&ility. (or t%e typical manu"acturin$ "irm purc%a!in$ i! re!pon!i&le "or !pendin$ more t%an %al" a dollar t%e "irm receive! a! income "rom !ale!. )ore dollar! are !pent "or purc%a!e! o" material! and !ervice! t%an "or all ot%er e*pen!e item! com&ined includin$ e*pen!e! "or #a$e! depreciation ta*e! and dividend! +Do&ler 199, p. 2-.2/0. (i$ure 1 detail! material! and ot%er co!t!.

1runo 2avr3ni4 P%.D. A!!i!tant Pro"e!!or o" )ar4etin$ (aculty o" 1u!ine!! and 'conomic! Ra5la$ova 1- 2000 )ari&or 6lovenia '.mail: &runo.5avr!ni47uni.m&.!i

Taxes and C ontributions interest Amortization '# '#

!# &#

Repayment Dividend
$#

$%# Wages, salaries, and employee benefits !"# C ost of materials and equipment purchased

(i$ure 1. Co!t! o" a manu"acturin$ company +adapted "rom Do&ler 199, p.2,0.

Purc%a!in$ al!o %a! a very important role "or !avin$! co!t! and ma4in$ pro"it. 8et u! a!!ume t%at a company %a! a pro"it mar$in o" 10 percent and t%e co!t o" $ood! purc%a!ed i! /0 percent o" !ale!. T%i! mean! t%at i" t%e company !old 91 million a year t%e "ollo#in$ &rea4do#n #ould repre!ent co!t! and pro"it! +(ernande5 199/ p.80:
6ale! )anu"acturin$ and over%ead co!t! +-0 percent o" !ale!0 Co!t o" product! and !ervice! purc%a!ed +/0 percent o" !ale!0 Total co!t! Pro"it +10 percent pro"it mar$in0 91 000 000 9-00 000 9/00 000 9900 000 9100 000

:o# let u! e*amine t%e e""ect o" a 10 percent decrea!e in co!t o" product! and !ervice! purc%a!ed "or t%e !ame company a!!umin$ t%at &ot% !ale! and t%e !ale! price remain t%e !ame: 6ale! )anu"acturin$ and over%ead co!t! +-0 percent o" !ale!0 Co!t o" product! and !ervice! purc%a!ed +-/ percent o" !ale!0 Total co!t! Pro"it +1/ percent pro"it mar$in0 91 000 000 9-00 000 9-/0 000 98/0 000 91/0 000

T%i! analy!i! !%o#! t%at reducin$ t%e co!t o" $ood! and !ervice! purc%a!ed &y only 10 percent actually repre!ent! a /0 percent increa!e in pro"it a!!umin$ t%at t%e !ale! price! and total !ale! do not c%an$e. T%i! !ame e""ect #ould re;uire a /0 percent increa!e in !ale! #it% t%e ori$inal 10 percent pro"it mar$in and no reduction in co!t o" product! and !ervice! purc%a!ed:

6ale! )anu"acturin$ and over%ead co!t! +-0 percent o" !ale!0 Co!t o" product! and !ervice! purc%a!ed +/0 percent o" !ale!0 Total co!t! Pro"it +10 percent pro"it mar$in0

91 /00 000 9,00 000 9</0 000 91 3/0 000 9100 000

=ne can conclude "rom t%i! analy!i! t%at t%e e""ect o" reducin$ t%e co!t o" product! and !ervice! purc%a!ed i! e;ual to a muc% lar$er percenta$e increa!e in !ale!. >%ic% i! pre"era&le: to #or4 #it% !upplier! to reduce co!t! &y 10 percent or to !pend time and ener$y tryin$ to increa!e !ale!? @n !ome companie! #it% limited mar4et! t%i! may not even &e a valid ;ue!tion. @n procurement t%e activity #%ic% in a !en!e underlie! t%e reali!ation o" all ot%er o&Aective! o" a $ood purc%a!e deci!ion i! t%e !election o" t%e !upplier. 'ven #%en a &uyer may %ave done %i! %ome#or4 in identi"yin$ t%e ri$%t product to meet %i! need! t%e ac%ievement o" t%e &uyerB! o&Aective #ill ultimately depend on %o# #ell %i! !election o" t%e !upplier %a! &een. T%e &uyer! mu!t en!ure t%at t%e !upplier i! a&le to provide $ood! #%ic% con"orm to t%e &uyerB! !tandard! and !peci"ication!. @" t%e !upplier ultimately !%ip! $ood! #%ic% do not meet t%e &uyerB! re;uirement! all %i! ot%er o&Aective! #ill al!o not &e reali!ed. T%u! t%e importance o" !electin$ a dependa&le and relia&le !upplier i! !el".evident. @t i! in t%i! conte*t t%at !upplier a!!e!!ment and evaluation %a! received $reat attention in procurement mana$ement. T%e procurement ta!4 %a! &ecome more comple* and t%e need "or !ourcin$ o" relia&le and dependa&le !upplier! %a! &ecome more important t%an even &e"ore. T%e !earc% "or an accepta&le !upplier can &e $reatly a!!i!ted &y adoptin$ a !y!tematic approac% to !upplier apprai!al and evaluation. 6election and mana$ement o" t%e ri$%t !upplier i! t%e 4ey to o&tainin$ t%e de!ired level o" ;uality on time and at t%e ri$%t priceC t%e nece!!ary level o" tec%nical !upportC and t%e de!ired level o" !ervice. 1uyer! mu!t ta4e !i* important !upplier.oriented action! in order to !ati!"y t%i! re!pon!i&ility +Do&ler 199, p.21-0: 1. Develop and maintain a via&le !upplier &a!e 2. Addre!! t%e appropriate !trate$ic and tactical i!!ue! 3. 'n!ure t%at potential !upplier! are care"ully evaluated and t%at t%ey %ave t%e potential to &e !ati!"actory !upply partner! -. Decide #%et%er to u!e ne$otiation a! t%e &a!i! o" !ource !election /. 6elect t%e appropriate !ource ,. )ana$e t%e !elected !upplier to en!ure timely delivery o" t%e re;uired ;uality at t%e ri$%t price.

$ SOURCE DECISION MA(ING '""ective !ource deci!ion! #ill only &e made #%en all relevant "actor! %ave &een con!idered and #ei$%ted a$ain!t t%e ri!4! and opportunitie! #%ic% apply. :ot all !ource deci!ion! #ill Au!ti"y t%e !ame level o" attention &ut maAor purc%a!e! #ill al#ay! repay care"ul deci!ion ma4in$. 6ourcin$ t%u! involve! muc% more t%an !imply pic4in$ a !upplier or contractor "or eac% re;uirement in i!olation. @t involve! continuin$ relation!%ip! &ot% #it% pre"erred !ource! #%ic% are actually !upplyin$ $ood! and !ervice! and #it% potential !ource! #%ic% may %ave &een pa!!ed over "or t%e pre!ent &ut are !till in t%e runnin$. @t involve! deci!ion! a&out %o# to allocate t%e availa&le &u!ine!! and on #%at term! to do &u!ine!! +1aily 1998 p.1-0.1-10: a) A**ri+u*,- o. a /oo0 -u112i,r >%ile a de"inition o" a $ood !upplier #%ic% #ould &e accepta&le to every&ody #ould &e di""icult to #rite t%ere are a num&er o" attri&ute! #%ic% mi$%t &e re$arded a! de!ira&le "or a typical relation!%ip. T%e "ollo#in$ li!t i! $iven &y #ay o" !u$$e!tion only. Deliver! on time. Provide! con!i!tent ;uality. Dive! a $ood price. Ea! a !ta&le &ac4$round. Provide! a $ood !ervice &ac4up. @! re!pon!ive to our need!. Feep! promi!e!. Provide! tec%nical !upport. Feep! t%e &uyer in"ormed on pro$re!!. +) Di..,r,n* *31,- o. -our4in/ T%ere are many di""erent type! o" !ource deci!ion!: con!uma&le !upplie!C production material! and component!C capital purc%a!e! +e.$. mac%inery0C intellectual property +e.$. !o"t#are0: !u&contractor!C and !ervice!. 'ac% type #ill involve di""erent "actor!.

4) Pur45a-in/ -*ra*,/i,Accordin$ly in procurin$ a variety o" material! !ervice! and type! o" e;uipment a purc%a!in$ department i! li4ely to pur!ue !everal purc%a!in$ !trate$ie! at once. @t! array o" potential c%oice! or !trate$y option! #ill o"ten include +6c%euin$ 1989 p. 1-0.1-190: @nternal ver!u! e*ternal !ourcin$ 8ea!in$ ver!u! &uyin$ @nternal or e*ternal !tandardi!ation Dome!tic ver!u! over!ea! !ourcin$ 6in$le !ource ver!u! multiple !ource! 6toc4le!! and Gu!t in Time purc%a!in$ Co.operative purc%a!in$ 8ocal ver!u! national purc%a!in$ Di!tri&utor! ver!u! manu"acturer! 1uyin$ a !upplier (or#ard &uyin$

0) Sour4in/ -*ra*,/i,Purc%a!in$ mana$er! %ave to ma4e deci!ion! a! to t%e type o" !ource! t%at needed material! #ill &e o&tained "rom. To $uide t%em in t%e!e tactical c%oice! and ac%ieve con!i!tent per"ormance in t%e lon$ run t%ey %ave to develop !ourcin$ !trate$ie! t%at "orm a co%erent !trate$ic "rame#or4 and %elp provide an!#er! to !uc% ;ue!tion! a!: )a4e or &uy? 8ea!e or &uy? 1uy a !ource? Eo# many vendor!? Dome!tic or over!ea! !ource!? 8ocal or national !ource!? 6ourcin$ "rom di!tri&utor! or manu"acturer!? Purc%a!in$ mana$er! mu!t care"ully !elect and evaluate t%e advanta$e! and di!advanta$e! o" eit%er alternative to arrive at meanin$"ul conclu!ion!.

6 THE PROCESS OF SUPPLIER SELECTION 6upplier !election i! central to t%e #or4 o" all &uyer! and i! pro&a&ly t%e mo!t important "unction in t%e purc%a!in$ proce!! +'rrid$e 199/ p.1/10. T%e need to identi"y and !elect a ne# !upplier can ari!e "rom a num&er o" rea!on!. A !ource u!ed in t%e pa!t may %ave $one out o" &u!ine!!. @t! price may %ave ri!en unrea!ona&ly or it! ;uality !lipped to unaccepta&le level!. @t! tec%nolo$y may &e outdated. >%atever t%e rea!on "or a !upplier !earc% purc%a!in$ mana$er! $o t%rou$% an important and comple* !election proce!! to identi"y and o&tain t%e !ource &e!t !uited to !ati!"y t%e "irmB! re;uirement!. @t &e$in! #it% a !can o" availa&le in"ormation !ource! and "ini!%e! #it% t%e !elected !upplier to t%e "irm! approved !upplier!B li!t +"i$ure 20. T%e purc%a!in$ mana$er %a! a lot o" !ource! o" !upplier in"ormation +6c%euin$ 1989 p.21/.21<0. T%e!e include pu&li!%ed !ource! internal !ource! per!onal contact! and international !ource!. :e*t t%e purc%a!in$ mana$er "ormulate! t%e !election criteria to &e applied t%rou$% t%i! !peci"ic proce!!. @n mo!t ca!e! #%ere !uc% deci!ion! are made t%e !election proce!! i! compre%en!ive. @ncluded amon$ t%e criteria u!ed &y one company #a! t%e re;uirement t%at t%e !upplier !%ould %ave t%e Hnece!!ary capa&ilitie! and e*perienceH . T%i! meant t%at a potential !upplier +1aily 1998 p.1-3.1--0: #a! via&le in t%e lon$er term "inancially tec%nically and in production term!C #ould &e a&le to participate in t%e early p%a!e! o" product de!i$n and development a! a "ull partner in t%e proce!!C #ould openly !%are in"ormation on t%e "unctional a!!em&ly and t%e !ervice! re;uirement! o" part! includin$ co!t and ;uality tar$et!C #ould &e orientated to#ard! ta4in$ co!t out o" product and improvin$ total !y!tem per"ormance to mutual &ene"itC #ould &e a&le to develop prototype! a! #ell a! manu"acture volume productionC #ould &e prepared to a$ree to co!t !tructure tar$et!C #ould #or4 #it% t%e &uyin$ company !o a! to increa!e t%eir "le*i&ility in meetin$ c%an$in$ demand! and operate on a pull rat%er t%an a pu!% &a!i! in t%e proce!! reducin$ t%eir o#n #a!te! !uc% a! inventory %oldin$ unnece!!ary in!pection and e*ce!! #or4 in pro$re!! a! #ell a! t%o!e o" t%e &uyin$ company.

Sour4,- o. Su112i,r In.or7a*ion

Pu+2i-5,0 Sour4,In*,rna2 Sour4,P,r-ona2 Con*a4*- In*,rna*iona2 Sour4,

Candidate List Formulation of Selection Criteria Information from Market Researc Preliminary Screening
Identification of Qualified Candidates
#limination of $n%ualified Candidates

Questionnaires
Financial Information

Detailed Study Selected Supplier

Re"ected Suppliers

Supplier !isits

&on'approved Suppliers Approved Supplier List

(i$ure 2. 6electin$ a ne# !upplier +6ource: 6c%euin$ 1989 p.21,0 Anot%er multinational company !ee4in$ partner !upplier! o" t%e !ame 4ind "ormulated t%e "ollo#in$ criteria. T%e !upplier !%ould %ave: 6ound &u!ine!! !en!e and attitude. A $ood trac4 record in !upplyin$ t%e mar4et in #%ic% t%e &uyer operate! +or !imilar0. A !ound "inancial &a!e. A !uita&le tec%nical capa&ility #it% modern "acilitie!. A total ;uality orientation. Co!t e""ective mana$ement. '""ective purc%a!in$ ac;ui!ition and control. Dood morale amon$ t%e #or4"orce. '""ective lo$i!tical arran$ement!. A cu!tomer !ervice mentality.

T%e entire proce!! include! di""erent repre!entative! one or more en$ineer! a "inancial analy!t and ot%er! intere!ted to Aoin t%e purc%a!in$ mana$er in variou! p%a!e! o" t%e !election proce!! a! needed and appropriate. T%i! i! particularly important in t%e "ormulation o" t%e !election criteria and t%e detailed !tudy o" ;uali"ied candidate!. Eo#ever t%e purc%a!in$ mana$er! are re!pon!i&le "or t%e !election proce!! a! a #%ole.

=nce t%e !election criteria %ave &een e!ta&li!%ed e*ploratory in"ormation i! collected in an in"ormal "a!%ion to #eed out o&viou!ly un;uali"ied !upplier candidate! early in t%e proce!!. Properly e*ecuted a !upplier !election proce!! i! e*pen!ive and time con!umin$. '*ploratory in"ormation #ill come primarily "rom pu&li!%ed !ource! and a "e# p%one call! to #ell.in"ormed per!on! #it%in t%e or$ani!ation or in ot%er "irm!. T%e!e !emi."inali!t! are t%en !u&Aect to an in.dept% and detailed !tudy p%a!e. Eere t%ey are contacted and a!4ed to complete pro!pective !upplier ;ue!tionnaire! t%at provide an!#er! to many important ;ue!tion!. T%e!e an!#er! are t%en revie#ed &y t%e team to$et%er #it% "inancial in"ormation. =nly t%o!e !upplier! #%o appear to &e !uited to t%e "irmB! need! and are intere!ted in it! &u!ine!! are t%en vi!ited &y t%e team #%ic% conduct! a plant in!pection and %old! di!cu!!ion! #it% mana$ement. Care"ul #ei$%in$ o" t%e evidence &y t%e team mem&er! t%en produce! a #inner #%o i! !u&!e;uently added to t%e "irm! approved !upplier li!t. Common courte!y re;uire! t%at t%e lo!in$ !upplier! &e noti"ied a&out t%e !election deci!ion and &e $iven rea!on! "or t%eir reAection. & IDENTIFICATION AND SELECTING INTERNATIONAL SUPPLIERS 6trate$ic $lo&al !ourcin$ i! de"ined a! inte$ration and co.ordination o" procurement re;uirement! acro!! #orld.#ide &u!ine!! unit! "orei$n !upplier! +Trim 199- p.<00: 1. Co!t &ene"it!. 6upplier! a&road may &e a&le to o""er lo#er price! t%an dome!tic !upplier!. T%i! i! e!pecially true o" manu"actured $ood! #%ic% are produced #it% c%eap la&our material and over%ead co!t!. 2. Ei$% ;uality tec%nolo$ical 4no#.%o#. 6ome countrie! %ave developed a reputation "or producin$ $ood ;uality product! and !ome product! are more advanced t%an t%o!e to &e "ound in t%e dome!tic mar4et. 3. Dreater competition. Competition %a! opened up opportunitie! &ot% in t%e dome!tic and international mar4et. -. 6upplier! may &e cu!tomer!. T%i! relate! to t%e i!!ue o" reciprocity and it can &e !tated t%at t%e #orld repre!ent! a potential mar4et "or t%e dome!tic producer. /. @n!u""icient dome!tic capacity to meet demand. Eo#ever on t%e ot%er %and t%ere are a lot o" di""icultie! in &uyin$ a&road: 1. Communication pro&lem! +6aunder! 199- p.23,0: Di""erent lan$ua$e! can cau!e communication and contractual di""icultie! loo4in$ at common item! proce!!e! tec%nolo$ie! and !upplier!. T%ere are many rea!on! #%y a &uyer may decide to !ource "rom

8on$er di!tance! a""ect t%e "ea!i&ility o" per!onnel vi!it! and ma4e clo!e contact! more di""icult Di""erent time 5one! a""ect direct telep%one contact! T%e operation o" di""erent !tandard! in di""erent countrie!.

1. T%e time re;uired "or ne$otiation i! $enerally lon$er t%an #it% %ome !upplier! 2. Currency di""icultie!. 3. 8e$al di""icultie!. @t i! nece!!ary to determine +8y!on! 199, p. 18-0: >%at la# !%all $overn t%e tran!action? Arran$ement! "or ar&itration. Protection o" &uyer a$ain!t in"rin$ement! o" patent!. Protection o" &uyer a$ain!t product lia&ility.

1. Delay! in delivery due to t%e #eat%er car$o tran!"er doc4 !tri4e! and cu!tom! action 2. 8o$i!tic! pro&lem!: )ore comple* tran!port and di!tri&ution arran$ement! increa!e co!t! and add to uncertainty re$ardin$ delivery 8on$er di!tance! may reduce t%e "ea!i&ility o" operatin$ on a Au!t in time &a!i! Pro&lem! in ac;uirin$ !pare! and replacement!.

1. @mportant dutie! and in!urance 2. 6peci"ication! e!pecially #%ere t%ere are di""erence! in unit! o" mea!urement. 1uyin$ a&road i! very comple* and t%e &uyer mu!t ac;uire !peciali!t 4no#led$e re$ardin$: 1. T%e country "rom #%ic% %e intend! to &uy i. e. it! economic and political condition! and policie! 2. T%e !upplier "rom #%om %e intend! to &uy i.e. capacity "inancial po!ition reputation and relia&ility 3. T%e le$al and commercial con!ideration! and procedure! involved in &uyin$ a&road e.$. orderin$ tran!portation and payment. 6uc% in"ormation may &e o&tained "rom t%e "ollo#in$ +(arrin$ton 199- p.1180: 1. Ii!it! to t%e propo!ed international !upplier 2. Re"erence! "urni!%ed &y t%e propo!ed international !upplier 3. Commercial attac%e! and ot%er $overnment department o" "orei$n nation! -. T%e department o" Trade and @ndu!try /. 6%ippin$ and "or#ardin$ a$ent! ,. T%e &an4! <. C%am&er o" commerce 8. Directorie! e.$. Fompa!! >er 8ie"ert >a!

9. @nternet 10. 6peciali!t in;uiry a$ent! e.$. Dun and 1rad!treet 1u!ine!! @nternational 11. Trade Aournal! 12. Trade e*%i&it! 13. @(P)) . @nternational (ederation o" Purc%a!in$ and )aterial! )ana$ement A"ter care"ully !tudyin$ t%e environmental !ettin$ in a pro!pective !ource country and it! impact on &u!ine!! tran!action! purc%a!in$ mana$er! %ave to en$a$e in t%e &a!ic ta!4 o" identi"yin$ evaluatin$ and !electin$ appropriate !ource! in t%i! country. Eavin$ e*amined t%e environmental condition! in a pro!pective !ource country and identi"ied !upplier candidate! t%e purc%a!in$ mana$er ne*t %a! to ;uali"y t%em in a preliminary "a!%ion availa&le at t%i! point +"i$ure 30. =nce a num&er o" ;uali"ied !ource! o" !upply %ave &een pinpointed in a $iven country t%e purc%a!in$ mana$er #ill #ant to !end t%em a !et o" !peci"ication! concernin$ t%e material to &e procured and a re;ue!t "or ;uotation. >%ile tec%nical !peci"ication! are identical "rom one country to t%e ne*t international price ;uotation! are u!ually re;ue!ted in t%e "orm o" landed price. T%i! #ould ma4e a price ;uote "rom an international !upplier compara&le to t%at o" a dome!tic !ource. >it% ;uotation! "rom intere!ted !upplier! in %and t%e purc%a!in$ mana$er can &e$in t%e #eedin$ out proce!!. T%i! #ill include contactin$ re"erence! and o&tainin$ "inancial report! "rom international &an4!. (or t%e !emi."inali!t it #ill al!o mean on.!ite vi!it! to evaluate tec%nolo$ical and mana$ement competence. Upon completion o" an on.!ite vi!it t%e &uyer #rite! a detailed report !ummari!in$ t%e "indin$! and impre!!ion! o" t%e team and outlinin$ t%e rea!on! #%y t%i! !upplier #ould or #ould not ma4e a $ood !ource. T%e ne*t !tep i! placin$ a !mall trial order #it% one or more o" t%e companie! to !ee %o# #ell t%ey live up to t%eir commitment! in term! o" t%e delivery !c%edule and output ;uality. 6upplier! #%o per"orm !ati!"actory on trial order! are t%en placed on t%e approved !upplier li!t and are $iven re$ular "ull.!i5ed order!. 6upplier development !%ould al!o e*tend to analy!in$ %o# t%e vendor!B o#n !y!tem and procedure! can &e inte$rated more clo!ely #it% t%e cu!tomer! +C%ri!top%er 199- p.20<0. Con!ideration! important in "orei$n !ource ;uali"ication +Carter 1993 p.1210 are t%e e*perience o" t%e !upplier a! a "orei$n !ource and manu"acturer "inancial !tren$t% o" t%e !upplier t%e ea!e #it% #%ic% e""ective communication can &e e!ta&li!%ed and implication! "or inventorie! +!i5e location and !o on.0.

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(i$ure 3. T%e @nternational purc%a!in$ proce!! +adapted "rom 6c%euin$ 1989 p.3-00 ! SUPPLIER EVALUATION T%e or$ani!ation +&uyer0 i! in a muc% &etter po!ition to evaluate an e*i!tin$ !upplier &a!ed on %i! pa!t per"ormance t%an i! t%e ca!e #it% a ne# !upplier. T%e tec%ni;ue! and met%od! o" t%i! evaluation u!ually tend to concentrate on per"ormance in re$ard! to di""erent "actor!. Ta!4 varia&le! #%ic% determine t%e c%oice o" !upplier are traditionally !tated a!: ;uality ;uantity timin$ !ervice and price. 6ervice include! &e"ore.!ale! !ervice "or !ome product! and a"ter.!ale! !ervice "or ot%er!. Prompt and accurate ;uotation! relia&le delivery time! ea!e o" contact #it% per!on! in aut%ority tec%nical advice and !ervice availa&ility o" te!t "acilitie! #illin$ne!! to %old !toc4!C t%e!e are Au!t !ome o" t%e varied t%in$! t%at ma4e up t%e pac4a$e called !ervice. Dood !ervice &y t%e !upplier reduce! t%e &uyerH ! #or4load increa!e! t%e u!e"ulne!! or availa&ility o" t%e product and dimini!%e! t%e uncertainty a!!ociated #it% ma4in$ t%e &uyin$ deci!ion. (inancial !ta&ility i! one o" !everal !upplier c%aracteri!tic! not mentioned a! a ta!4 varia&le &ut #%ic% i! nevert%ele!! important. 1uyer! pre"er !upplier! to &e rea!ona&ly pro"ita&le &ecau!e t%ey are intere!ted in continuity and on.time delivery. A !upplier #it% ca!%."lo# pro&lem! #ill %ave di""iculty payin$ t%eir &ill! and con!e;uently in o&tainin$ material! t%eir delivery time! and po!!i&ly product ;uality #ill pro&a&ly !u""er. Dood mana$ement i! al!o important. >ell mana$ed !upplier! improve met%od! reduce co!t! develop &etter product! deliver on time %ave "e#er de"ective product! and &uild %i$% morale

in t%eir #or4"orce. =n.t%e.!pot !urvey! o" "acilitie! and per!onnel &y tec%nical and commercial repre!entative! o" t%e purc%a!er are o"ten carried out to evaluate potential !upplier! . alt%ou$% !ometime! it may &e po!!i&le to eliminate t%i! on t%e &a!i! o" a !upplierH! reputation a! o&tained "rom #ord o" mout% and pu&li!%ed in"ormation. @" t%e !upplierH! e!ta&li!%ment i! to &e vi!ited "or evaluation purpo!e! mo!t purc%a!er! prepare in advance a c%ec4li!t to remind inve!ti$ator! o" #%at to loo4 "or and to record t%eir "indin$!. )any "irm! u!e multiple pa$e c%ec4li!t! a!4in$ many ;ue!tion!. (inally t%e !upplier i! evaluated "or named product! or proce!!e! a! "ully approved approved conditionally approved or unapproved. Iariation! o" t%e c%ec4li!t approac% are le$ion and c%an$e! and improvement! are incorporated a! t%e need! o" t%e or$ani!ation c%an$e +1aily 1998 p.1-80. Typical c%ec4li!t ;ue!tion! are: Do t%ey trade #it% our competitor! Are con"idential document! properly controlled? Doe! t%e &uyer %ave tec%nical !upport? Eo# do t%ey !earc% t%e mar4et and %o# o"ten? Eo# lon$ %ave t%ey &een e!ta&li!%ed? >%at are t%eir inve!tment plan!?

T%e content! o" !uc% c%ec4li!t! are devi!ed to !uit individual re;uirement!. (or c%ec4in$ t%e ;uality capa&ility o" a !upplier it i! %o#ever po!!i&le to !tandardi!e c%ec4li!t!. T%e international company DorenAe %a! di""erent "actor! "or evaluatin$ t%e e*i!tin$ dome!tic and international !upplier!. T%e mo!t important are: 1. Juality o" purc%a!in$ material! 2. Delivery !c%edule! 3. Price -. Term! o" payment /. A.te!t ,. Con"irmation o" t%e purc%a!e order <. Pac4a$in$ 8. 6tandardi!ation 9. 8ocation o" plant 10. 6ervice!

6upplier! are evaluated "or all t%e!e "actor!. T%e !corin$ !y!tem i! 0./ point! "or t%e "ir!t "ive "actor! and 0.3 point! "or t%e ne*t "ive "actor!. Total po!!i&le point! are -0. 0 . 1/ point! . !upplier not accepted 1,.30 point! . !upplier accepted conditionally 31.-0 point! . !upplier accepted =n t%e &a!i! o" t%e!e "actor! t%e evaluated !upplier i! accepted or reAected. 'valuation "or all !upplier! mu!t &e at lea!t once a year.

SUPPLIER9 D,2iv,r3 =n time :ua2i*3 / '*cellent / Pri4, T,r7- o. 1a37,n* A;*,-* T%e lo#e!t / 90 day! / (or all material! / Con.ir7a*ion *5, Pur45a-, or0,r S*an0ar0i-a*ion S,rvi4,Pa4ka/in/

'arlier Dood 8o# </ day! (or mo!t material! Al#ay! 3 Al#ay! 3 '*cellent 3 To !peci"ication 3 0.100 4m 3

1* delay 3 Accepta&le 3 Avera$e 3 ,0 day! 3 (or !ome material! 3 A"ter ur$e 2 6ometime! 2 Dood 2 6ometime! to !pec. 2 101. /00 4m 2

2* delay 2 1* reclamation 2 Ei$% 2 8etter o" credit 2 @n procedure to $et 2

)ore delay 1 2* reclamation 1 T%e %i$%e!t 1 8e!! t%en ,0 day! 1 :o atte!t 1 :ever 1 :ever 1 Poor

1 :ot to !peci"ication 1 )ore t%an /00 4m 1

Lo4a*ion o. -u112i,r T=TA8 P=@:T6:

Ta&le 1. 6upplier evaluation ' CONCLUSIONS Purc%a!in$ i! an e!!ential &u!ine!! "unction t%at !%ould ma4e t%e !ame level o" contri&ution to a "irmB! !ucce!! a! t%e ot%er maAor &u!ine!! "unction!. Purc%a!ed material! con!ume more t%an a %al" o" t%e avera$e manu"acturin$ "irmB! !ale! revenue. T%ere i! no dou&t t%at t%e mo!t important purc%a!in$ deci!ion! are concerned #it% !electin$ t%e ri$%t !ource! o" !upply. @" t%e correct !ource deci!ion i! made in a particular in!tance t%en t%e &uyin$ companyB! need! !%ould &e met per"ectly. (inally t%e &uyer !%ould evaluate development! in t%e !upplierB! per"ormance. T%e o&Aective o" !upplier a!!e!!ment i! to determine t%e e*tent to #%ic% a particular !upplier #ill &e a&le to meet %i! delivery o&li$ation &ot% no# and in t%e "uture.

Bi+2io/ra1539 1. 1aily P. (armer D. Ge!!op D. Gone! D. Purc%a!in$ Principle! and )ana$ement Pitman Pu&li!%in$ 8ondon 1998. 2. Carter G.R. Purc%a!in$ K Continued @mprovement T%rou$% @nte$ration Eome#ood 1u!ine!! =ne 1u!ine!! 1993. 3. C%ri!!top%er ). 8o$i!tic! and 6upply C%ain mana$ement Pitman Pu&li!%in$ 8ondon 199-. -. Do&ler D.>. 1urt D.:.: Purc%a!in$ and 6upply )ana$ement :e# Lor4 )cDra# Eill 199,. /. 'rrid$e A. )ana$in$ Purc%a!in$ 1utter#ort% Eeinemann =*"ord 199/. ,. (arrin$ton 1. )ana$in$ Purc%a!in$ C%apman M Eall 8ondon 199-. <. (ernande5 R. Total Juality in Purc%a!in$ M 6upplier )ana$ement 6t.8ucie Pre!! 199/. 8. 8y!on! F. Purc%a!in$ Pitman Pu&li!%in$ 8ondon 199,. 9. 6aunder! ). 6trate$ic Purc%a!in$ M 6upply C%ain )ana$ement Pitman Pu&li!%in$ 8ondon 199-. 10. 6c%euin$ '.'. Purc%a!in$ )ana$ement Prentice Eall 'n$le#ood :e# Ger!ey 1989. 11. Trim P. T%e 6trate$ic Purc%a!in$ )ana$er Pitman Pu&li!%in$ 8ondon 199-.

VA<NOST SELE(CI=E I EVALUACI=E DOBAVL=A>A U MANAGEMENTU NABAVE Sa? , * a k =vaA rad po4a5 uA e 5naN aA ma n a $ e m e n t a na& a v e u !uvre m e n i m uvAeti ma u4a5uAuOi na nAe$ov vi!o4i pro"itni pote nciAal u u!por e d &i ! o!tali m pra4tiNni m altern a tivi ma 4oAe ma n a $ e ri m a !toAe na ra!pola $ a nA u. Proce ! na& a v e ima mno$ e vaPn e 5ada t 4 e od 4oAi% !e 4ao 4lAuNan moP e i5dvoAiti i5&or naA&olAe$ do&avlAaN a . :aA&olAi do&avlAaN pruP a optimal n u 4valitet u ma t e riAala u5 pravovr e m e n u i!poru4u povolAnu ciAenu i vi!o4i nivo u!lu$ e . 6to$a Ae &ilo 4oAi o&li4 na& a v e 5adovolAa vaAuOi !a mo u onoA mAeri u 4oAoA 5adovolAava i do&a vlAaN od 4oAe$ ro&a potAeN e . 2a dono3 e nA e opti mal ni% odlu4a ma n a $ e ri na& a v e imaAu na ra!pol a $ a nA u ra5liNite !tra t e $iAe. :a dan a 3 nA e m $lo&alno m trPi3tu !ve vi3e podu5 e O a po!t aA e ovi!no i o !tra ni m do&avlA aNima. )otivi 5a na& a v u i5 ino5e m ! t v a !u ra5liNiti i to od 4valitet a proi5vod a na& a v a pa do niPe ciAene. @ u !luNaAu 4upovine od !tra no $ do&a vlAaN a uo&iN aA e n e 5ada t 4 e identi"i4aciAe ocAenAiva nAa i i5&ora mor a

do&avlAaN a . =cAenAivanA e po!toAe Oi% i mo$ uOi% do&avlAaN a Ae 4ontinuira ni proce ! 4oAe$ !luP&a na& a v a mor a o&avlAati &ar e m Aedno m $odi3nAe.