Supplier Selection and Evaluation
In the acquisition process, perhaps the most important activity is selecting the best supplier from among a number of suppliers that can provide the needed materials. The buying process is complex because of the variety of factors that must be considered when making a purchase. The process includes both decision makers and decision influencers, who combine to form the decision-making unit. Increasingly, organizations are using cross-functional teams to make important decisions.
Five-step purchasing process for managing supplier relationships from the identification of a need to make a purchase through ongoing evaluation and follow-up. Purchasing managers may consider a broad range of factors when making the purchasing decision. These may include issues such as lead time, on-time delivery performance, ability to expedite, price competitiveness, and postpurchase sales support.
Purchase Categories. There are six major purchase categories in most companies: (1) component parts, (2) raw materials, (3) operating supplies, (4) support equipment, (5) process equipment, and (6) services. These may be routine, ongoing purchases or non-routine purchases that may require special attention because they represent a new buy, an infrequent purchase, a major acquisition or if there are problems or major opportunities (strategic, cost savings) associated with the buy.
To determine the impact of supplier performance on productivity, performance must be measured and evaluated. Next, the data can be used to identify those suppliers with whom the firm wishes to develop long-term relationships, to identify problems so that corrective action can be taken, and to realize productivity improvements.