SUPPLIER SELECTION AND EVALUATION

SUPPLIER SELECTION AND EVALUATION

Text : Siti Aisah binti Ehsan Helmi and
          Nurul Shahirah binti Daud

Images : Google images

In today's competitive environment, progressive firms must be able to produce quality products at reasonable prices. Product quality is a direct result of the production workforce and the suppliers. Besides that, buying firms select suppliers based on their capabilities, and not purely on the competitive process.

What reasons for make and buy ?

Reason for make:

1. Lower production cost
2. Unsuitable supplier
3. Maintain core competence
4. Increase or maintain size of company
5. Obtain desire quality
6. Assure adequate supply
7. Remove collusion

Reason for buy:

1. Lower acquisition cost
2. Inadequate facilities
3. Reciprocity
4. Save time
5. Quantity discount
6. Lower labor cost
7. Inadequate managerial or technical resources

What is outsourcing?

Outsourcing is the complete transfer of a business process that has been traditionally operated and managed internally to an independently owned external service provider.

As a retailer, the quality of your logistics-everything from transportation and warehousing to delivery and installation-plays a vital role in the success of your company. A smooth running logistics operation leads to better customer satisfaction, lower costs and overall higher profitability- among other benefits.Because it's such a vital of your business, it's sometimes hard to consider outsourcing as an option.

Benefits of Outsourcing

• Cost minimization - accomplished by reducing direct operating costs, eliminating overhead costs, and transforming fixed cost into variable cost.
• Refocusing the organization to its core competencies- focuses of what the organization does best and/ or transforming the business to focus on new products and services.
• Improvement in operating performance- accomplished by increasing quality, increasing productivity and obtaining new capabilities technologies from external sources.
• Increase market share and revenue- accomplished by accessing the providers network and accelerating expansion into new market.

Supplier Relationship Management ( SRM )

1. Supply chain management process is based on the idea of efficient resource coordination and teamwork.
2. Buyer and supplier relationships have become increasingly important for a number of reasons.
3. Buying firms experience a great deal of pressure from customers and competitors to keep their edge and stay in business by reducing costs, improving product, improving service quality and enacting continuous improvement.
4. Customers need to know their suppliers to make sure that their demand can be provided/process.
5. In getting know the supplier, customer can find their supplier from SRM.

Four Pure Supply Management Relationships

• Divided into four behavioral dimensions : counterproductive ( lose-lose), competitive ( win-lose), cooperative (win-win), collaborative (win-win) relationships.

1. Counterproductive relationships : (selfish person)

     - focused on getting what is best for it that each puts the other at the disadvantages

     - this type of relationship is undesirable because it does not promote a positive rapport between buying             and supplying firms involved and neither organization achieves its goals

2.  Transactional or competitive relationships: ( big company take advantage)

     - both buying and supplying firms strive to get the very best arrangement possible in their negotiation.

  - fail to see the benefits a both organizations obtaining their goals and objectives.
  - both of buying and supplying firms will stop at nothing to make sure that their come out on top and do          not care about the other organization's well-being.

3. Cooperative relationships : ( benefits of both parties )

     - recognize the potential value of both organizations getting what they want and maximize the potential of           having a long - term relationships.

     - commonly found within a buying organization's preferred/tier- two service providers and suppliers list.

4. Collaborative relationships : ( benefit to both parties )

     - two organizations truly realize the benefits of working together to optimize outcomes for both                        organizations.

     - two firms will work together to develop a strategy to deliver a high - quality product or service on time           and under budget.