A smart manager will establish a culture of gratitude.

Expand
the appreciative attitude to suppliers, vendors, delivery
people, and of course, customers.

Prepared By: M. Imran Taseer 1

 Vendor Selection
 Supplier Evaluation and Selection Process
 Wish List of Vendors
 Wish list of customers
 Limit Suppliers in Selection Pool
 Method of Supplier Evaluation and Selection
 Key Supplier Evaluation Criteria
 Criteria for selection of suppliers

Prepared By: M. Imran Taseer 2

 “It is a process of assessing, comparing,
negotiating (if necessary) and then finally
deciding on a person or a company for buying
certain products or services”

Prepared By: M. Imran Taseer 3

 1. Recognize the need or supplier selection.

2. Identify key sourcing requirements.

3. Determine sourcing strategy.

4. Identify potential supply sources.

5. Limit suppliers in selection pool.

6. Determine method of supplier evaluation and selection.

7. Select supplier and reach agreement.

Prepared By: M. Imran Taseer 4

 Make a wish list or expectations list regarding
each material or category.

Prepared By: M. Imran Taseer 5

 Vendor wants
◦ to make a profit
◦ to grow the business
◦ to earn a reference
◦ to increase market share

 Vendor needs
◦ to know why they are there – what is expected?
◦ to know where the boundaries are – requirement /
profits
◦ to understand the Rules of business with customer
◦ clear direction, redirection, and healthy criticism

Prepared By: M. Imran Taseer 6

 Customer wants
◦ to eliminate pain of managing in-house
◦ Reduction in total supply chain cost
◦ to keep SOME information private

 Customer needs
◦ to know how his own organization operates
 Staff, purchasing, contracts, bidding, politics
◦ to provide ongoing correction, criticism, and
prioritization
◦ to have professional approach by vendor
◦ to have complete solution package from vendor

Prepared By: M. Imran Taseer 7

 Current Suppliers
 Sales Representatives
 Information Databases
 Experience
 Trade Journals
 Trade Directories
◦ Pakistan Business Directory www.businessdirectory.pk
◦ Yellow pages
 Trade Shows
 Second-Party or Indirect Information
 Internet Searches

Prepared By: M. Imran Taseer 8

1. Manufacturer or distributor
2. Local or National or International source
3. Small or Large supplier
4. Multiple or Single supplier for the item or
service

Prepared By: M. Imran Taseer 9

 Purchasers often perform a first cut or
preliminary evaluation of potential suppliers
to narrow the list before conducting an
in-depth formal evaluation.
◦ Financial Risk Analysis
◦ Evaluation of Supplier Performance
◦ Evaluation of Supplier-Provided Information

Prepared By: M. Imran Taseer 10

 Evaluation from Supplier-Provided Information
(RFQ)
 Supplier Visits
 Use of Preferred Suppliers
◦ A preferred supplier is one that consistently meets
stringent performance criteria.

 External or Third-Party Information

Prepared By: M. Imran Taseer 11

 Management Capability
 Employee Capabilities
 Cost Structure
 Total Quality Performance, Systems, and Philosophy
 Process and Technological Capability
 Environmental Regulation Compliance
 Financial Stability
 Production Scheduling and Control Systems
 E-Commerce Capability
 Supplier’s Sourcing Strategies, Policies and
Techniques
 Longer-Term Relationship Potential

Prepared By: M. Imran Taseer 12

 The vendor selection team must not be from
simply the procurement department; it must
have people from cross functional
departments
 Like
◦ Design • Planning
◦ R&D • Quality
◦ Production • Finance
◦ Marketing
◦ Procurement
◦ Logistics

Prepared By: M. Imran Taseer 13

 Cost
◦ Geographical location
 near or far, distance would add in indirect
costs/time
◦ Evaluation of not only direct price but an indirect
also, as far as it is possible
◦ Comparison of price in the market
◦ Payment conditions
◦ Exchange rate stability, if applicable i.e. in case of
global supplier

Prepared By: M. Imran Taseer 14

 Direct cost • Once the total cost of
 Indirect cost poor quality is factored
◦ Cost of waste in
◦ Opportunity lost cost
◦ Cost of storage • The cheapest may well
be the most costly
◦ Administrative cost
◦ Transportation cost
◦ Maintenance cost
◦ Insurance etc.

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 Time
◦ Geographical location
 near or far, distance would add in indirect costs/time

◦ Delivery time (close / away from desired)

◦ Delivery conditions
◦ How has the supplier responded to your RFQ?
◦ Analysis of goods release system

Prepared By: M. Imran Taseer 16

 Quality
◦ Are specifications completely meeting the requirements
◦ Shape / appearance
◦ Material
◦ Packing etc.
◦ Certification is always preferable
◦ Online or offline procedure
◦ Rejections / waste

Prepared By: M. Imran Taseer 17

 Performance - main characteristics of the
product/service
 Aesthetics - appearance, feel, smell, taste
 Special Features - extra characteristics
 Conformance - how well product/service conforms
to customer’s expectations
 Reliability - consistency of performance
 Durability - useful life of the product/service
 Perceived Quality - indirect evaluation of quality
(e.g. reputation)
 Serviceability - service after sales
 Capability
◦ Financial situation
 R&D investments
 Company's annual report
◦ Supplier’s Market share
 position in the market
◦ Equipment infrastructure and capability
 Capacity and flexibility
 State of the art machinery
◦ Warranty / After sales services
◦ Communication facilities

Prepared By: M. Imran Taseer 20

 Strategy
◦ Which supply chain manufacturing model they are
following? i.e. MTS, MTO, etc.
◦ Long term strategic plans
◦ Suppliers interest in developing a partnership
 Access
◦ Transport conditions
 i.e. access, linked with location
 Flexibility
◦ Range of products and services

Prepared By: M. Imran Taseer 21

 Other supporting points
◦ Political situation
◦ General reputation
◦ Is supplier also supplying to your competitor?
◦ Any awards and achievements supplier has made
has an added advantage
◦ Trends within the supplier’s industry
◦ Dependence on other companies i.e. 2nd tier
suppliers

 Assessment of how supplier has given presentation

Prepared By: M. Imran Taseer 22

 Supplier 1
Weighting Raw Weighted
Time 20 0.30 6

Cost 30 0.20 6

Quality 20 0.20 4

Others 20 0.10 2

Capability 10 0.20 2

TOTAL SCORE 100 1.00 20

Prepared By: M. Imran Taseer 23

 Supplier A Supplier B Supplier C
Weighting Raw Weighted Raw Weighted Raw Weighted
Time

Cost

Quality

Others

Capability
TOTAL
SCORE

Prepared By: M. Imran Taseer 24