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Identifying Preferred Suppliers. A Training Tool on Supplier Selection By Kira Connell Bus M 361. What Will Be Covered. Supplier Selection Defined Brainstorming Exercise: How Can This Tool be Used in Your Organization? Important Criteria in Supplier Selection

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Identifying preferred suppliers l.jpg

Identifying Preferred Suppliers

A Training Tool on Supplier Selection


Kira Connell

Bus M 361

Identifying Preferred Suppliers

What will be covered l.jpg

What Will Be Covered

  • Supplier Selection Defined

  • Brainstorming Exercise: How Can This Tool be Used in Your Organization?

  • Important Criteria in Supplier Selection

  • Application: Supply Base Reduction

  • Example and Exercise for Supplier Selection

Identifying Preferred Suppliers

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Supplier Selection Defined

  • Supply chain: “a network of manufacturers and service providers that work together to convert goods from the raw materials stage to the end user” (Bozarth and Handfield, 4)

  • Supplier: an entity that supplies goods or services ; network of suppliers combine to form a supply chain

  • Supplier selection: the process of identifying and choosing an appropriate supplier

Identifying Preferred Suppliers

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Brainstorming Exercise

  • Why is a reliable and quality supplier important to your organization?

  • What are the major effects of a poor supplier on your business?

  • How does this affect the final customer?

Identifying Preferred Suppliers

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Control of process


Commitment to quality



Culture and relationship


Ray Carter’s 10 C’s to Supplier Selection

Identifying Preferred Suppliers

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  • Supplier must have core skills associated with the goods or services they are providing

  • Look for the following:

    • Internal systems to ensure competence/effectiveness

    • Appropriate number of staff in each skill area

    • Adequate supervision ratio of managers to employees

Identifying Preferred Suppliers

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  • Supplier must have sufficient resources to provide adequate amount of goods or services

  • Look for:

    • Flexibility in volume changes

    • Percent of annual turnover your contracts comprise

    • Subcontracting

Identifying Preferred Suppliers

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  • Supplier should consistently provide accurate, timely, and quality products

  • Consider the following:

    • Does the supplier have adequate facilities and updated technology?

    • Does the vendor frequently ask for concessions or require rework?

    • Is the supplier ISO 9000 certified?

Identifying Preferred Suppliers

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Control of Process

  • Supplier must have control over the systems and people that control resources, inventory, budgets, and processes

  • Assess whether:

    • The vendor can adapt these systems when necessary

    • The supplier monitors actual performance against the process

    • The vendor has a corrective program in place

Identifying Preferred Suppliers

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  • Supplier should provide their goods or services at a competitive and reasonable price

  • Also consider:

    • Payment and interest terms

    • Additional costs

    • An unusually low price which may indicate a misunderstanding of the scope of the work or an intention to cut corners on quality or safety

Identifying Preferred Suppliers

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Commitment to Quality

  • Supplier should be committed to providing a quality product

  • Also look for:

    • Management inspections, quality control standards, evaluation mechanisms

    • Operating and maintenance instructions, quality plans, certificates of conformity

    • Service record with other buyers

Identifying Preferred Suppliers

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  • Supplier should have sufficient cash funds to ensure that it will remain in business

  • Look for:

    • A company’s financial records and ratios

    • Evidence of having “a challenging year” or “a year of consolidation”

    • Willingness to provide a financial guarantee

Identifying Preferred Suppliers

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  • A supplier should be environmentally sound and a safe workplace

  • Look for evidence of:

    • Compliance with government regulations

    • Accident statistics

    • Regular safety inspections

    • Safety awards

Identifying Preferred Suppliers

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Culture and Relationship

  • Supplier should be able to match the requirements of your contract

  • Consider:

    • Is the supplier committed to an open working relationship built on trust?

    • Does the contractor understand what benefits you are seeking and what value they can add?

    • Is the contractor able to work within your cultural barriers?

Identifying Preferred Suppliers

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  • Supplier should be fully integrated with information and communication technology

  • Look for:

    • Whether the company has the technology to immediately receive information regarding changes in an order

Identifying Preferred Suppliers

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Supply Base Reduction

  • Defined as “the process of and activities associated with reducing the number of suppliers that an organization utilizes” (Odgen, 30)

  • Many companies now using supply base reduction as a method to improving supplier selection

Identifying Preferred Suppliers

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Pros/Cons of Supply Base Reduction

  • Pros

    • Closer relationship with supplier

    • Easier to communicate

    • More reliable

  • Cons

    • Prevents competition which may raise prices

    • Less flexibility in volume

Identifying Preferred Suppliers

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Real World Example: Harley-Davidson

  • Example of effectiveness of supply base reduction

    • Reduced its less-than-truckload (LTL) carrier base from 68 to 7

    • Trimmed $1.5 million in transportation costs

    • On time performance up 2.5 percent

    • Service failures substantially reduced

Identifying Preferred Suppliers

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Practical Exercise

  • Assignment: break up into groups of 4-5 students and rank the four suppliers you are given, identifying the preferred supplier

  • Instructions:

    • Consider the following five suppliers

    • Identify most important criteria for supplier selection

    • Rank each of the five suppliers based on criteria and justify reasons for preferred supplier

      Note: you manufacture wooden tables and chairs and are looking for a vendor to supply wood

Identifying Preferred Suppliers

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Suppliers for Practical Exercise

  • Supplier #1: good cost and quality; bad consistency and control

  • Supplier #2: good consistency and capacity; bad quality

  • Supplier#3: good competency and cash; bad cost and culture

  • Supplier #4: good clean and communications; bad cash

Identifying Preferred Suppliers

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Discussion Q’s for Exercise

  • Which supplier is preferred and why?

  • Should your organization consider using more than one of the suppliers?

  • What effect does the industry have on which criteria you consider most important?

  • What are the pros and cons of having a limited number of suppliers? Of having multiple suppliers?

Identifying Preferred Suppliers

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  • Identifying and selecting preferred suppliers is an objective process

    • There is no formal solution or process

    • There are important criteria that can be used to help identify the best supplier

    • Using these criteria still involves value judgment

Identifying Preferred Suppliers

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  • Introduction to Operations and Supply Chain Management, by Cecil C. Bozarth and Robert B. Handfield, Pearson Prentice Hall, 2006

  • Making the Right Choice, by Alan Oxenbury, Supply Management, July 2006

  • The Final Countdown, by Alan Oxenbury, Supply Management, August 2006

  • How Many ‘C’s in Partner?, by Neil Fuller, Supply Management, September 2005.

  • Supply Base Reduction: An Empirical Study of Critical Success Factors, by Jeffrey A. Ogden, Journal of Supply Chain Management: A Global Review of Purchasing & Supply, November 2006.

Identifying Preferred Suppliers

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