Vendor selection, development and‌ Vendor rating

Vendor Selection Importance:

• The purchasing department is responsible for choosing the right suppliers.
• Good vendor selection significantly impacts business success.

Vendor Selection Procedure:

1. Identify Potential Vendors: Initial survey of possible suppliers.
2. Develop Approved List: Shortlist suppliers (inquiry stage).
3. Evaluate & Select: Choose the best supplier.

Supplier Evaluation Factors:

• Cost: Price of goods.
• Delivery: Timeliness and reliability.
• Design & Specs: Material compliance.
• Legal: Contractual and regulatory adherence.
• Vendor Rating: Supplier performance assessment.

Vendor Rating Methods:

1. Categorical Plan:
   • Assigns suppliers to categories (preferred, neutral, unsatisfactory).
   • Simple, based on personnel assessments for future reference.
2. Weighted-Point Method:
   • Evaluates suppliers based on factors (quality, price, delivery) with assigned weights.
   • Calculates a composite weighted score for comparison.
   • Suppliers are then rated, often as A, B, or C.
3. Cost-Ratio Plan:
   • Ranks suppliers based on incurred procurement costs.
   • Analyzes cost-ratios for different variables (quality, price, delivery).
   • Includes quality costs (inspection, defects).