MNP2601 CHAP5

MNP 2601 Purchasing Management
Chapter 5: Evaluation and selection of suppliers
Purchasing and supply is the fundamental link between an organization and its suppliers – The purchasing
and supply professional is responsible for the inputs into an organization.

But it is fairly managing suppliers, the P & S manager effectively protect the cost structure of the
organization.

Environmental forces influencing supplier selection
The selection of suppliers cannot be made in isolation. The environment, company policies, strategies etc
must be considered.

The business environment must also being considered. Factors include makro, market and micro factors.

Environmental forces influencing decisions. See table 5.1 on page 77 in the textbook




Supplier assessment criteria
Cost, quality, delivery and environmental issues are regarded as the main key performance indicators of
supplier Assessment.

The key driver for the use of a supplier is competitiveness or cost.

Many successful organizations based the operational expertise and the key performance objectives of
quality, cost, speed, dependability, flexibility and service which form the basis for the criteria for selection
and evaluation of suppliers.

Purchasing needs to consider many additional criteria:

 Quality and quality accreditations
 Price, cost and cost structure
 Delivery
 Time
 Flexibility
 Service
 Financial status
 (OPC) – Operations planning and control
 The technology and process capability
 Supply chain management
 Environmental issues, and social responsibility
 BBB EE

Quality and quality accreditations
Quality products and services improve:


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,  the productivity of the organization due to fewer operational interruptions and better working
conditions,
 quality of the final output
 better customer service


Price, costs and cost structure
One of the primary roles of a purchasing professional is to defend the cost structure without compromising
quality.

The determination of the cost structure of a supplier can lengthy process.

Delivery
Importance of on time delivery cannot be overstressed. There is always pressure to reduce inventories, and
make smaller and more frequent deliveries.

Time
Time based competition is one of the current management buzz words which includes reducing time in order
to gain an advantage.

Reducing time means improvement in productivity. Individual organisations and supply chains are looking
for improvements in all aspects of time reduction.

Suppliers should be actively involved in analyzing and reducing cycle times using cross functional teams and
techniques such as process/time mapping.

Flexibility
The supplier can be flexible with regard to:

 volume – ability to change the number of products supplied
 Variety ability to offer a range of products
 Mix – ability to provide varying proportions
 New products – ability to adapt in order to develop new products

Service
Essentially a fusion of the above key criteria.

Suppliers should not just want to qualify to be considered a supplier, they need to win orders and win them
consistently.

Service would also include the supplier’s attitude to managing the customer’s inventory to providing in
consignment stock facilities.

Financial status
Is imperative to determine the Financial Health or condition of the supplier. It’s an wise to select a supplier
who is in difficult financial straits.


Systems: operations planning and control, E commerce
And assessment of the operations planning and control (OPC ) systems used by a supplier is important.

Trend nowadays is away from traditional forecasting and information systems towards real time demand
planning systems based on current happenings.

The ability to communicate electronically between customer and supplier is rapidly becoming a mandatory
prerequisite for suppliers.




Technology and process capability
In considering a potential suppliers technology and process capability, the purchasing manager needs to look
at:




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