Entries tagged as supplier qualityHow to Rate Supplier Performance
Purchasing Magazine regularly surveys its readers about supplier evaluation. The numbers vary slightly by year but an average of three quarters business purchasing departments have a system (formal or informal) for rating supplier performance. Would you be surprised to learn and Price is rated highest by fewer than 15%? The four elements of cost are: Quality, Service, Delivery, and Price (QSDP) TCO =the sum of the cost elements in QSDP, or TCO = Quality + Service + Delivery + Price The importance of each element of QSDP will vary with the item purchased. Maintenance Repair and Operations (MRO) parts offer a good example. A buyer may be more concerned with having parts on hand at the supplier (Delivery) than with the Price. Downtime costs caused by not having an inexpensive low value item available would far outweigh any Price advantage and thus is probably worth a higher price. The buyer attains its objective of availability and lower TCO. Economically, it may cost the supplier more to warehouse the customer’s parts and thereby justify a slightly higher price. The supplier may understandably try to leverage that advantage into the highest supportable price. It the price gets too high, the buyer will recalculate its TCO. Meaningful supplier evaluations are based on objective measures using the principles of TCO. To effectively evaluate a supplier’s performance, each of the QSDP elements should be further broken down into sub elements. Here is one way we .could break down each of sub-element of QSDP.
Comments: 0; Published: June 25, 2010; Permalink
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