Supplier Selection Criteria .

.

 Disclose To advise management of a relationship that may appear to be a conflict of intrest.  Purchasing personnel are trained in cost savings techniques like negotiation and strategic sourcing. . the purchasing department is aware of enterprise wide standards. department heads and other internal customers are typically not. Good documentation can prove that a decision was reached ethically.  The purchasing department has savings generating tools such as eSourcing systems at their disposal. Engineers. What Justifies an Increase in Purchasing Scope?  Purchasing personnel are measured on their performance of purchasing processes. Other departments are measured on different contributions to the organizations. department heads and other internal customers are not which can result in the selection of a supplier that goes out of business during the course of the relationship.  The purchasing department is goods at identifying alternatives.  Recuse To remove yourself from participation in a decision in order to avoid conflict of intrest.  Documents To produce and retain written correspondence about your disclosure.  Purchasing personnel are trained at evaluating supplier viability. Other departments do not. which can lead to paying higher prices. it can leverage aggregated volume for lower costs. minimize inventory and avoid pitfalls. Ethical accusations often arise months/years after decision is made. As such. then guiding the organization to select the best option.  By working with all departments. Assigning purchasing responsibility to these departments keeps them from spending time on their primary functions within the organizations.Steps to undertake when you have a relationship with a current or potential supplier’s employee. Engineers.

 By having the purchasing department provide centre –led oversight. the organization can have more assurance that all departments are benefitting from the organizations leveraged buying power.  To improve supplier performance To bring innovations from the supply base-in today’s competitive world.  Price levels historical fluctuation. . Benefits of E-Sourcing     Streamlining the sourcing process Reducing prices by maximizing supplier competition.g. Historical price levels can help you determine whether current levels are relatively high or low.  Evaluate your starting point. Steps to commodity price forecasting  Properly categorize the commodity against an existing price index and be more specifice.  Look at Micro and Macro economic factors that may give hints as to where pricing may go. Newsprint instead of paper. Goals of Strategic Sourcing  To save money  To reduce risk. E-Sourcing The process of obtaining bids from different suppliers via a single portal. Creating a repository for sourcing information. if your original price was established at the peak of the market and was not established through best practices like strategic sourcing. Helps in gathering of supplier information. Every business needs constant flow of innovative ideas to keep their competitors from stealing their market share. Strategic sourcing helps should enable one to sustain continuity of supply in the face of unexpected disruption to the operations of one or more suppliers.

 Considering the downside of certain cash flow strategies  Determine a balanced inventory approach  Considering supply market forces when setting financial goals. What you should do at the end of a negotiation?  Enter the last negotiation session with the authority to commit. Ways by which Procurement Department with Finance Dept. you lack full control over the negotiation run the risk of the supplier going around you and negotiating directly with those who do have decision making authority. if you lack the authority to commit to a deal in that last negotiation session.Todays organization support diversity.  Share this negotiation strategy with management in order to get full support on the importance of leveraging last negotiation strategy. so decisions made as part of strategic sourcing should consciously help move the organization towards those goals.  Agreeing on cost savings reporting standards By agreeing with finance on standards and using income statement to keep score.  Have at least one week of slack time between the last scheduled negotiation and the actual day you must commit.. Creating uncertainty by stating a need to “think it over a week”-even if you don’t really have to can make your supplier nervous and more susceptible to agreeing to more favorable terms. Procurements cost savings reporting will be more believable. environmental responsibility and other goals. . If the supplier tries to dissuade you from ‘thinking it over’ ask would there be any benefit to my organization for deciding now as opposed to next week. To support the organizations social responsibility goals.

 Put your reasoning into context Fundamental features of Management  Is universal i. they look out for quality.e. basic principles of mgt are universally accepted?  Is purposeful i.  An interactive process  Is concerned with productivity? Functions of Management      Directing Planning Staffing Organizing Controlling . You are essentially asking them for a favor.e.  Address specifications and expectation. delivery or service.  Consider the possibility that the relationship could devolve into an opportunistic one  Consider ethics and cultural norms. renegotiating a contracted price may be considered unethical. often when suppliers renegotiate.Tips on how to Renegotiate a Supplier Contract  Approach your supplier carefully If you contracted for the product/service they are no obligation to concede to you.  It applies at all levels of the organization. Be careful about specifying that you want the same product/service that you are getting today for a lower rate. use persuasion techniques to petition the supplier. the aim of all managers is the same. to attain organization objectives.  Convince the Supplier that a price reduction is fair.

Methods of Controlling Budget-Plan expressed in numbers for purpose of controlling operations. Strategies used to reduce cost of purchased services . Types of Budgets  Balance sheet budgets  Cash budgets  Revenue & Expense budget  Time Budget  Capital expenditure budget Non-budgetary Controls  Statistical data  Special reports & analysis  Breakeven point analysis  Personal Observation  Gant chart  Network analysis Benefits of contracting out       Cost savings Competitive edge Increased mkt accessibility Expertise in distribution function used Relieves manufacture from non-core function Enhanced customer satisfaction due to timely delivery Demerits of contracting out  Loss of confidentiality  Loss of control  Inflexibility  Insensitivity to customers  Loss or lack of direct contact with customers  Delayed feedback from customers. Auditing – Associated with verification of financial records & practices.

purchasing effectiveness & purchasing efficiency. advertising.  Makes things visible.  May contribute to better motivation. Importance of measuring purchasing performance  Purchasing performance evaluation can lead to better decision making since it identifies variances from planned results. .i. This produces the devpt of broadly Based.e regular reporting of actual versus planned results enables a buyer to verify whether his/her expectations have been realized.insuarance Considering consortium buying Take advantage of volume aggregation to negotiate quantity discounts Developing integrated purchasing strategies so that purchasing professionals can work with users of services to enforce financial controls.     Using reverse auctions Outsource service purchasers i. Operate without the Guidance of a well defined performance stds.  Problems of accurate measurement – Purchasing performance is a result of many activities Which due to their intangible character are difficult to Evaluate.  Difference in scope of purchasing .Purchasing tasks & responsibilities differ greatly from one Company to another. effectiveness & efficiency.  Lack of formal objectives & performance stds – Most purchasing depts. Purchasing performance evaluation is the quantitive/qualitative assessment over a given time towards achievement of corporate or operational goals/objectives relating to purchasing economies. Problems encountered in measuring & evaluating purchasing performance  Lack of definition – Although frequently used in practice as well as in theory.e. Haven’t been precisely defined.performance. uniform benchmarking & evaluation systems.terms like Purchasing.  May lead to better communication with other depts.

2.the orgns can hav more assuarance that all departments are benefitting from the orgns leveraged buying power. Are typically not which can lead to paying higher prices. 6. Do not. 7.. Are npt which can result in the selection of a supplier that goes out of business during the course of the relationship.Factors influencing purchasing performance measurement    Strategic business area –Purchasing is actively involved in deciding the company’s core business Reinforces the company’s competitive position. Too often. . Other depts.minimize inventory and avoid pitfalls previously identified with competing products. then guiding the organization to select the best option. Purchasing personnel are trained in cost savings techniques like negotiation an strategic sourcing. 3. Operational. Assigning purchasing responsibility to these other departments keeps them from spending time on their primary functions within the organization.the purchasing dept is aware of enterprise wide standards. 4. Other departments are measured on different contributions o the organizations. The Purchasing dept is good at identifying alternatives. By working with all depts. Part of intergrated logistics – Mgt introduces targets to buyers on quality improvement lead the & improving supplier deleivery reliability.By having the purchasing dept provide centre led over sight . the internal customers just go with the first supplier found commiting the organization to a suboptimal arrangement that endures for years.g. eSourcing systems while other depts. Its not uncommon for suppliers to harge different departments within the same organization different prices when they can get away with it. 5.As such it can leverage aggregated volume for lower costs. Purchasing personnel are trained at evaluating supplier viability while other depts. Purchasing personnel are measured on their performance of purchasing processes. The Purchasing dept has savings generating tools e.administrative activity What Justifies an Increase in Purchasing Scope? 1.

Sign up to vote on this title
UsefulNot useful