Question

“It is all about time, cost and delivery. That is how we select our suppliers.”

• Describe the main activities and objectives of the supplier selection and evaluation process.
• With reference to practical examples, critically evaluate the statement above and discuss whether you agree or disagree with it.
• Critically discuss the AHP method and its application in the supplier selection and evaluation process.

Answer 1

Answer - Supplier Selection Activities, Objectives, and Evaluation:

• Supplier selection scorecard - This is the first step where you note down what you want and what you do not want in your supplier.Besides you list down the characteristics of your potential supplier considering the business requirement you have.
• Identify potential suppliers - Now you analyze the past, present, and new suppliers available for you to consider and try and find out the best match to your requirements by ranking them based on your scorecard.
• Negotiate - You now negotiate with the top-ranked suppliers on your scorecard for a good deal and agreement.
• Create contract - Now you create a written contract with terms to which both you and the suppliers agree to abide by for the period of association.

These steps help understand the business objective of how urgent the need of the supplier is and whether they would be assigned for some critical delivery and the step-wise scorecard matching method helps in evaluating the best fit for your company.

The statement 'it is all about time, cost, and delivery. That is how we select our suppliers." - is correct to a large extent except for the fact that apart from the three crucial resources to an organization; time,cost, and delivery; some other parameters like efficiency, trustability, etc help in screening the supplier who is best fit in all respect. Suppliers are very critical for any company, their on-time delivery of requirements helps companies to produce and deliver output on time to customers. So a scorecard method listing all important parameters essential for your business will help find the accurate supplier for your business.

AHP method for selection and evaluation of suppliers:

AHP stands for Analytical Hierarchy Process, which selects and evaluates suppliers on multi-criteria like cost, flexibility, quality, delivery, and variety. It aids companies to take correct decisions on supplier selection. The companies evaluate all positive alternative suppliers available on the parameters of the AHP framework mentioned above. The supplier matching to the maximum number of the parameters that the company has framed is considered to be the best fit for the company and is chosen for further negotiation. If all parameters and considerations fall in place, then both parties sign contract of agreement to abide during their period of association. the AHP decision process of supplier selection is very effective and helps the company maximize the best use of its resources.

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