Supplier Selection Process

Introduction
A supplier is a vendor and a party in the supply chain that provides goods or services to other
parties in the value chain. The supplier often operate as a manufacturer or middle-man in the
supply chain, for example, the distributors, retailers, and trade in a business-to-business (B2B) or
business-to-customer (B2C) setup (McFarlane, 2014). The role of Suppliers in the supply chain
is very vital as the businesses rely on them to provide the raw materials essential to manufacture
goods or deliver the finished goods to the retailers or final consumers (James, 2011). Thus, it is
vital for a company to carefully identify and select the right suppliers that suit their objectives
and align to their business strategies.

There are different approaches according to Lu (2011) that can be employed in the supplier
selection process. The first is focus on the product offering, while the second on supplier
capability, and third is a combine both the product offering and supplier capability (Lu, 2011).
Moreover, the supplier’s capability can be measured employing a company’s designated
selection criteria in which the company can apply one or more quantitative tools to facilitate the
process of selection. Three basic quantitative tools which can be used by managers (procurement
or anyone in charge). They are the Categorical Method, Cost-Ratio Method, and Linear Average
Method (Lu, 2011).

Description of Case Study

This case study present a scenario with three suppliers compared based on three values for the
price, quality, and delivery.
i.) Price given value is based on the price quoted by supplier vs. outsourcing company
target price is highest for supplier B at 105%, then supplier A for 90% and supplier C is
the last with 80% only.
ii.) The value for quality is expressed as parts accepted vs. parts delivered and supplier B
has 100%, supplier A has 90% and C has 85%.
iii.) The value for delivery is based on parts delivered on time vs. parts delivered Supplier B
is at 100% whereas B and C both are at 90%.
In addition to these criterion above, other factors to be considered for each supplier are:

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 Supplier A: Overseas supplier with transport lead time of three weeks
Supplier B: A supplier facing financial issues
Supplier C: Proximity supplier with transport lead time of three hours

Case Study Analysis: Solution and Strategies

In a market where the qualifying and selection factors are quality and time, the company must
select a dependable supplier that can provide high-quality supplies at the stipulated time. To
address this case study, the Linear Average Method is adopted because it takes care of the
people preferences towards different criterion. It is employed by assigning a weight to reflect the
relative importance of each criterion. The weight is a score that reflect the relative importance of
the criterion (Lu, 2011). The three criterion stated above shall be weighted as follows: Quality
(45), Delivery (30) and Price (35)

Table 1 Suppliers Selection Process (Using Linear Average Method)

Selection Supplier A Supplier B Supplier C
Weight
Criteria Score Total Score Total Score Total
Price 25 90 2250 105 2625 85 2125
Quality 45 90 4050 100 4500 85 3825
Delivery 30 95 2850 100 3000 95 2850
Total 9150 10125 8800

From the above results, Supplier B outperform the other suppliers with respect to its price,
quality, and delivery. It has the highest overall score (10,125), however, the supplier is facing
financial issues which is a vital issue that could possibly hamper the supply of materials if the
supplier lack liquidity to finance its operations or goes out of business. The risk is higher here
because the impact of this could negatively affect the whole supply chain and result in financial
loss for the company. After taking into consideration the overall accumulated scores and other
factors associated with the two suppliers left, I would select Supplier A.
The rationale for selecting Supplier A, is that the supplier does not have any financial issues
like Supplier B and has a better score than Supplier C in quality. Though Supplier A is an
overseas supplier with a transport lead time of three weeks, while Supplier C has a transport lead
time of 3 hours (being a local company), they still both have the same delivery score. Moreover,

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since the contract is for a long-term (for a 3year period) and a complex part of the company’s
value chain, it is assumed that the company will follow an integrated systematic process that
involves strategic planning, scheduling, and inventory control. Thus, in the course of its
operation, the company will be able to forecast the demand needed for the material and be able
to order ahead of time from Supplier A so as to receive in due time.
Since the qualifying and winning factors are quality and time, the election of Supplier A is
justified as the best supplier having the financial capability, higher quality materials and timely
delivery altogether. Besides, Supplier C can serve as an alternative option if immediate purchase
of the material will be required and could be affected by cross-country restriction such as in the
case of COVID. 19 pandemic. In this case, choosing a supplier within proximity is advantageous
and also for companies that employ the Just in Time (JIT) method where inventory is purchased
after an order is made by the customer (James, 2011).
Moreover, if the company’s factors changed to price and quality, my election of Supplier A
would not change because Supplier A still offer cost-effective and higher quality products. This
is also due to the reason that the supplier does not have any financial issues like Supplier B and
has a better score than Supplier C in price and quality.
To sum up, businesses are dependent on suppliers to manufacture the products that the
customers’ demand and the company should assess its suppliers using multiple quantitative tools
to select the best choice. The Chief Procurement Officer should consider various factors vital to
the company such as quality, price, delivery, value, flexibility, competency, consistency, and
proximity.
In this case study, it recommended that the Chief Procurement Officer should outsource to
Supplier A based on quality, price and delivery factors.

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 References

James, T., (2011). Operations Strategy. Bookboon.com

Lu, D., (2011). Fundamentals of supply chain management. Bookboon.com

McFarlane, D., (2014). The Challenges of Operations Management for Business Managers.

International Journal of Operations and Logistics Management, [Online] 3(1), pp.16-29.

Retrieved from: http://oaji.net/articles/2014/351-1393621192.pdf (Accessed: 28

September 2020)

Peavler, R., (2019) Inventory management. The Balances MB. Retrieved from

https://www.thebalancesmb.com/just-in-time-jit-inventory-management-393301

(Accessed: 28 September 2020)