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   Vendor Development can be defined as any activity that a Buying Firm undertakes to
improve a Supplier's performance and capabilities to meet the Buying Firms' supply needs.

       Activities to improve Supplier performance :-

   •   Assessing vendor operations.

   •   Providing incentives to improve performance.

   •   Promoting competition among vendor

   •   Working directly with vendor either through training or other activities.

Buying Firms use a variety of activities to improve Supplier performance, which includes,

* Assessing Suppliers' operations
* providing incentives to improve performance
* Instigating competition among Suppliers
* Working directly with Suppliers either through training or other activities etc…

                                Searching for a good supplier

Suppliers are found through following ways:-

    Inviting Quotations
    Purchasing directories
    Catalogs and vendor files
    Through magazines like “Industrial Product Finder” and “Purchase” etc…
    Through personal contacts with suppliers, salesman other buyer.
    Inviting Quotations:-

      Whenever a new indent is received by the buyer he sends enquiry to some of his
   regular supplier along with them he also send to some of new supplier. Their is good
   chance that in such exercise he may get good supplier. That supplier can become regular
   supplier in future.

   Purchasing directories:-

       There are numerous directories that show potential suppliers. They are listed
   alphabetically and by the type of product sold. Probably the most widely used directory
   is the buyer’s local telephone book. In “Tata yellow pages” are listed all local suppliers
   for various merchandise. Each is carefully edited to include only those products which
   are useful to the industrial buyer.

      Every purchase department keeps the catalogs by classifying their contents both by
   supplier name and by-product.

   Personal Contacts:-

      Buyers talk to salesman of potential vendors even when they have no immediate
   need for the product they sold. When need arises, they can refer to them. Many of them
   meet at the national seminars of purchase Management.

In the supply chain management selecting the right supplier is a very important role for
vendor development.

"Value" is defined as more than just a good price. Quality, service and delivery are very
important aspects required.

Vendors must have the capacity and distribution capabilities to meet requirements of the
buying firm.

Suppliers must have an electronic catalog and be capable of receiving orders electronically
and invoicing electronically. Electronic invoicing cuts down on the turn around time and
saves on resources

Vendors must be able to meet long-term contractual obligations.

Diversity: Vendors must be able to demonstrate support for diversity, equity and people
with disabilities in the workplace.

 Workplace Environment: Vendors must have policies, practices and standards in place
promoting a healthy environment.
After selecting supplier properly the progressive buyer makes it a point to support him.
Experienced persons from various departments like product design, engineering can
They also help to develop supplier relationships through vendor training programmes.
A visit to his firm to monitor the production, schedule, quality and also compliance with
the ethical conduct as prescribed is essential to keep up the reputation of buyer’s firm.
Technical support to reduce production cost.

All this is done to ensure the 7R’s (ryt qly,qty,price,tym,source,place,transport)

   TATA Motors let the suppliers come to them with creative ideas to meet their goals.
   McDonald's Canada also engages its suppliers and encourages them to be
   more environmentally-conscious. This lead to the creation in 2007 of an annual
   Sustainability Award
vendor and buyer firm should keep open mind for free flow of creative ideas and good

                          Vendor rating


Vendor Development can be defined as any activity that a Buying Firm undertakes to
improve a Supplier's performance and capabilities to meet the Buying Firms' supply needs

The vendor rating is also sometimes referred as supply rating is a business term which is
used to describe the process of measuring an organizations supplying performance and

The same system is used continuously to assess the strength and weakness of the short
listed vendors for there effective development

                   Factors for rating of vendors

      Price control: The price of the organizations product should be less or equal to its
       competitor so as to stay in the market
      Quality consciousness: The organization is always quality conscious so as to ensure
       its sale
      Financial ability: The material which is received from the vendor must suit the cost
       structure of the organization
      Technical ability: The organization should be well equipped in terms of technology in
       such a way that it should be able to convert the raw material received in to finished
       goods by its technology
      Morale of employees: This is very important aspect of the organization as the
       development of the organization depends on it
      Morale of employees
      Lead time
      Managerial capability

   All the factors mentioned above are very essential from the point of view of selecting a

                           Objectives of vendor rating

          Reviewing the order for better profitability

           In this case the organization has to select the order which is cost effective and
           quality is good

          Comparing the placement of order:-
           As there are many vendors in market the organization has to elect the best
           vendor by comparing his orders with the other vendors in terms of price, quality,
           service, its after sales service, the creditability that it provides

          Selecting the vendors:-
           The organization has to select the vendor for its new product development or
           changing the vendor for the running materials for the better results

                           Vendor performance rating

An appraisal has to be made for the vendor’s actual performance. The vendor can be
evaluated by the means of complicated formulas by taking various factors in to
consideration. The factors are first measured and then weighted. Even the simple formulas
can be used.

Amongst the factors which are mentioned above the basic factors are:

        Quality
        Price
        Service
The relative information is given to the other factors depending on their requirement
In order to have the valid comparisons of two or more vendors dealing in the contract of the
similar materials the factors are assumed to be constant for all the vendors involved the
process. Hence the vendor which has the highest performance gets the highest composite

                         Vendor evaluation

It is very essential to select a good vendor. Therefore it is very essential that the supply
received from the vendor has to be evaluated. While evaluating the buyer faces two

   •   Evaluating the performance of the vendor before the delivery has been made

       In this case the buyer has to evaluate the performance of the vendor in terms of :

       Its reputation in the market

       Its history from the other buyers

       The quality, price, service that it provides.

   •   Evaluating the performance of vendor after the delivery has been made.

       In this case the vendor has to evaluate on the basis of:

       The after sale service

        The credit facility

    Sum formulas that are used for evaluating vendor rating are as follows
•   Price Index = Lowest price bid

             Actual price paid

•    Lead Time = Shortest lead time available

                   Actual lead time

1. Quality Rating:

Q = Total quantity supplied.

Q1 = Quantity accepted.

Q2 = Quantity accepted with concession.

Q3 = Quantity accepted with rectification.

Q4 = Quantity rejected.

Q = Q1+Q2+Q3+Q4

Q = Q1+Q2+Q3


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