Supplier cost evaluation

[subpad]

Dear all,

How can we evaluate suppliers price proposal?

Kind regards,
Subpad

[TopLink]

Hi,

I would suggest that evaluating a supplier is not just about price, although this is a major factor.

Regardless of the products and sevices being provided, when assessing a number of suppliers it is useful to create a scoring matrix of the important criteria to be assessed. These criteria can then be weighted for importance by different people within your business and each proposal marked accordingly.

In assessing Third Party Logistics (3PL) proposals for example, I have often established a scoring matrix that covers up to 100 criteria, each weighted. These might include various sections on:

Skills and capability fit.
Cultural fit.
Assets/resources proposed for solution.
Solution offered.
IT provided.
Overall price.
Rate structure.
Management structure
etc etc.

A broad range of assessment criteria, measured by a number of people, is a good process for any major spend.

[subpad]

thanks.

If i m not wrong, above approach helps to assess existing suppliers price, performance, even may even consider for supply risk.

But I would like to know how can we evaluate price quoted by a new supplier

Kind regards,
Subpad

[subpad]

guys,

please advice me.... thx.

Regards,
Subpad

[Starbucks Junkie]

Subpad,

I believe to be able to evaluate a suppliers cost proposal, you would need to have indepth knowledge of supplier competitor pricings, Commodity costs of the raw materials if a manufactured product, including a factor for production and transportation from the supplier to yourselves.

There are I am sure other factors, but the ones above are what I can think of at the present.

SJ

[TopLink]

thanks.

If i m not wrong, above approach helps to assess existing suppliers price, performance, even may even consider for supply risk.

But I would like to know how can we evaluate price quoted by a new supplier

Kind regards,
Subpad

No, the approach I have suggested above was for new suppliers.

[PatriciaGuarnieri]

Hi,

I agree with TL, if you evaluate your suppliers only by price, you can commit some mistakes in the choice.
To the decision taking process regarding new suppliers, I believe that it is more appropriate to aggregate some criteria, including risk to support your choice.
You can find a method to measure these criteria through scores or weigths, like TL have suggested, you can use AHP, SMARTS, TODIM method, or other multicriteria method more appropriate.
However you should study carefully the situation to choose the best method to use, including the issue of compensation between weigths.

I think this is the more adequated way to take the decision.

Regards,

Patricia

[Worldclasssuplychain]

From my experience, sometimes supplier gave an extreme attractive price offer without any study of product that we are asking them to quote. If we select the wrong supplier by trusting that the best quoted price (extremely cheap) can meet the best Quality will cause a catastrophe in future. It is the best to assign the commodity team and the quality team to assess their capability and capacity prior asking them the RFQ. Capability means their financial strength and facility they have) and capacity (their experience, their customer). Hopes this helps....

[PatriciaGuarnieri]

It would be more interesting that you combine several factors to evaluate your suppliers as: price, quality, flexibility, reliability, structural capacity, availability to share information.
Another important detail is to define what weigths you will assign for each these factors.
Think about this.

Regards.

[billramsay]

Dear all,

How can we evaluate suppliers price proposal?

Kind regards,
Subpad

Hi Subpad,

The advice of other posters is correct - evaluate new suppliers across a range of criteria. You should find or develop a checklist, similar to TL's suggestions and weight each element to give you the profile you need for a supplier. For example is product/service quality more important than price? Is delivery reliability critical to you? Only you can answer these questions.

With supplier evaluation the key is to get suppliers to respond to your specific requests, rather than allowing them to pitch to you. You can approach suppliers in a number of ways - by selection, tender, on-line auction, etc. and get them to respond to the criteria and questions detailed in your plan. The key is to get all supplies to respond to your Request For Information, rather than sorting through a bunch of pitch documents that will not be aligned with each other and which will only give you each supplier's best spin.

Good luck!