1. Operations Management
Unit 5
Purchasing

2. Supplier Selection and Evaluation
Select supplier and reach agreement
Determine method of supplier evaluation and selection
Limit suppliers in selection pool
Identify potential supply sources
Determine sourcing strategy
Identify key sourcing requirements
Recognize the need for supplier selection
01/04/2017
V.Prabakaran, AP/MBA - Unit 5 - Purchasing

3. Evaluation and Selection Decisions
During new product development
Due to poor existing supplier performance
At the end of an existing contract
Buying new equipment
Expanding into new markets or product lines
Receiving internal user requisitions
01/04/2017
V.Prabakaran, AP/MBA - Unit 5 - Purchasing

4. Evaluation and Selection Decisions
Performing market tests
Facing countertrade requirements
During outsourcing analysis
Consolidating volumes
Conducting a reverse auction
When current suppliers have insufficient capacity
Reducing supply base size
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V.Prabakaran, AP/MBA - Unit 5 - Purchasing

5. Identify Key Sourcing Requirements
May be determined by internal and external customers
Supplier quality
Cost
Delivery performance
Other
Vary widely from item to item
01/04/2017
V.Prabakaran, AP/MBA - Unit 5 - Purchasing

6. Determine Sourcing Strategy
Single vs. multiple sourcing
Short-term vs. long-term contracts
Design support vs. operational support
Full-service vs. non-full-service suppliers
Domestic vs. foreign-based suppliers
Collaboration vs. arm’s length relationship
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V.Prabakaran, AP/MBA - Unit 5 - Purchasing

7. Identify Potential Sources
How well existing suppliers can satisfy cost, quality, and/or other performance objectives
Strategic importance of purchase requirement
Technical complexity of purchase requirement
01/04/2017
V.Prabakaran, AP/MBA - Unit 5 - Purchasing

8. Sources of Information
Current suppliers
Preferred suppliers
Sales representatives
Information databases
Experience
Trade journals
Trade directories
Trade shows
Second-party or indirect information
Internal sources
Internet searches
01/04/2017
V.Prabakaran, AP/MBA - Unit 5 - Purchasing

9. Limit Suppliers in Selection Pool
By using Vendor rating (Rating factors)
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V.Prabakaran, AP/MBA - Unit 5 - Purchasing

10. Method of Evaluation and Selection
Evaluation from supplier-provided information
Supplier visits
Use of preferred suppliers
External or third-party information
01/04/2017
V.Prabakaran, AP/MBA - Unit 5 - Purchasing

11. V.Prabakaran, AP/MBA - Unit 5 - Purchasing
Vendor rating
It is very difficult to identify the good vendors
Purchase department quality – vendor selection
An accurate vendor can be come an asset to a company – leads to increase in sales
01/04/2017
V.Prabakaran, AP/MBA - Unit 5 - Purchasing

12. V.Prabakaran, AP/MBA - Unit 5 - Purchasing
Rating techniques
Price
Discount received
Timely delivery
Freight & delivery charges
Service & installation cost
Credit terms & employee training
Cost reduction suggestions
Inventory plans & financial positions, etc
01/04/2017
V.Prabakaran, AP/MBA - Unit 5 - Purchasing

13. Techniques of vendor rating
Categorical plan – personnel from various division maintain informal evaluation records
The weighted point plan – A / B / C classification
Critical incidents methods – record of events and occurrences related to the buyer – vendor relationship is maintained in each vendor’s file
Checklist system
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V.Prabakaran, AP/MBA - Unit 5 - Purchasing

14. V.Prabakaran, AP/MBA - Unit 5 - Purchasing
Check list
Reliability
Technical capabilities
After sales service
Availability
Buying convenience
Sales assistance
01/04/2017
V.Prabakaran, AP/MBA - Unit 5 - Purchasing

15. V.Prabakaran, AP/MBA - Unit 5 - Purchasing
Thanks..
01/04/2017
V.Prabakaran, AP/MBA - Unit 5 - Purchasing