Question

Case Study: The supplier selection process is a critical activity within the operations of a company. Once the outsourcing decision is taken, a process aimed at analyzing and choosing the appropriate suppliers begins.

Suppose that you are a Procurement Analyst in a large company. You have been asked to create a proposal to the Chief Procurement Officer identifying the best supplier to outsource, for a 3-year period, a complex part of your company’s value chain. Your company operates in a mature market where the qualifying and winning factors are quality and time to customer respectively.

Based on the information included in the table, address the following questions:

What supplier would you select?

What is your rationale for your election?

What supplier would you select if your company’s factors changed to price and quality? Would your election change?

Supplier	Price	Quality	Delivery	Others
A	90	90	95	Overseas supplier (transport lead time 3 weeks)
B	105	100	100	Supplier facing financial issues
C	85	85	95	Proximity supplier (transport lead time 3 hours)

*Figures are expressed in % as follows:

Price: price quoted by supplier vs. outsourcing company target price

Quality: parts accepted vs. parts delivered

Delivery: parts delivered on time vs. parts delivered

Answer 1

We would select supplier B

For the company, most important factors are quality and time to customer. He is the only supplier amongst all the three who has a stellar reputation with both quality and delivery that is both are exactly 100 for him.

If company's factors are price and quality, then we cannot take from B because he charges the highest amongst all the other supppliers and he is facing financial issues. Accordingly, the second best supplier so far as both price and quality are concerned is A who has a score of 90 so far as both are concerned. Although suppplier C has a lower price than A at 85, but C has delivery score of 85 as against A. Thus we should choose supplier A if company's factors are both price and quality.