Vendor Selection and

Development
Prepared by ASHER RAMISH

Lecture 1-2
 Synopsis

• The decision to make or buy

• What is a vendor or supplier?
• Purchasing,
• procurement,
• supply management or
• strategic sourcing

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 The Decision to Make or Buy

• Extremely difficult for companies to survive by

performing all processes In-house due to lack of
expertise in 100% areas.
• Firms flexibility increases
• Focus on core competence
• Freeing up space doing some innovative tasks
• Strong chance to gain cost advantage

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 What is A Vendor?

“A vendor is any person or an organization,

physical or virtual, that is providing
services or products, directly or indirectly
to the business customer or end user”.

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 Why Enter a Vendor Relationship?

• The vendor must

– Do something I can’t do
– Do something I can’t afford to do
– Do something I don’t want to do
– Be better, faster, cheaper

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 Purchasing

A major function of an organization that is responsible

for acquisition of required materials, services and
information

Purchasing has traditionally been a low-profile function

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 Procurement

An organizational function that includes

specifications development, value analysis regarding
sourcing, supplier market research, negotiations, buying
activities, contract administration, traffic, receiving and
stores.

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 Supply Management

• Supply management is the identification,

acquisition, positioning and management of
resources that an organization needs in the
attainment of its strategic objectives.

• It‘s about managing risk and maximizing

opportunities.

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 Strategic Sourcing

• A process of developing a supply base capable of

becoming a complementary, value added business
partner.
• Integrates the capabilities of the supply base
• With a comprehensive view of a customers
requirements at all stages
• Into a unified supply network
• With customer responsiveness as the ultimate driver
of value.

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 Total Cost of ownership

• Direct cost • Once the total cost

• Indirect cost of poor quality is
– Cost of waste factored in
– Opportunity lost cost
– Cost of storage • The cheapest may
– Administrative cost well be the most
– Transportation cost costly
– Maintenance cost
– Insurance etc.

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Boeing's 787 Dreamliner Is Made Of
Parts From All Over The World

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