Evaluation of Potential Suppliers

7/30/2019 Evaluation of Potential Suppliers

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www.business.nd.edu/mark/survey/eps/

Dear Madam, Dear Sir,

Thank you very much for taking the time to participate in our survey. You may want to submit

your answers online. As an a lternative, you may print out this survey and return it by mail orfax to our address:

Dr. Wolfgang UlagaVisiting Associate Professor of MarketingDepartment of MarketingUniversity of Notre DameMendoza College of BusinessNotre Dame, IN 46556-5646Phone (574) 631-9997Fax (574) 631-5255E-mail: [email protected]

If you w ish to return our survey by mail or fax, please

EVALUATION OF POTENTIAL KEY SUPPLIERS

CONTEXT

Assume your company has decided to establish a Key Supplier Program and has asked you toevaluate 25 separate suppliers regarding their attractiveness for becoming a preferred strategicsupplier of a key component for your company.

You would like to select those suppliers that possess a high potential for creating value in acollaborative long-term relationship with your firm. To assist you in your task, a highly reliableexternal consulting firm has collected data and evaluated each of the potential suppliers on eight

separate value drivers. The information on each potential supplier is summarized in a one-pageprofile.

However, the summary report does not contain an overall evaluation of the attractiveness of eachkey supplier and the probability that you would recommend that the firm become a strategicsupplier. That is your job!

Further, each firm characteristic is rated in general terms (low, moderately low, average, moderatelyhigh, high). You will have to consider what each of these mean to you.

INSTRUCTIONS

Select a key component of your choice for a product manufactured by your company. For example, if your company were a manufacturer of washing machines, you might want to select an e lectric motor

as a key component.

Then briefly describe the supply situation for this component and your own background byanswering the questions on the following page.

We finally would like to ask you to read the de finitions of each supplier evaluation criteria (‘valuedrivers’) and the one-page description for each firm. Please record independently your overallevaluation of the attractiveness of each firm for becoming a supplier before examining the nextfirm’s summary report. Use the 7-point scales at the bottom of each summary report. Consider whatis required to be an attractive supplier candidate when making your decisions. Do not spend a greatdea l of time on each decision, but do consider all the information. Please try to use the entire scale.

EXAMPLE OF OVERALL RATING SCALE

If you feel that a firm is particularly unattractive as a key supplier, place an «X» in the left most

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http://www.business.nd.edu/mark/survey/eps/pdf/EPS_210503.pdf

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blank, as shown below:

If you feel that another firm was an especially attractive potential key supplier, place an «X» in theright most blank, as shown below:

Please read the following definitions of key supplier characteristics:

Product Quality: The extent to which the supplier’s product meets the customer’s specifications.Key aspects of product quality are performance, reliability, and consistency over time. Typicalmeasures of product quality are ‘Returns’ or ‘Parts per Million’ (PPM).

Service Support: In addition to tangible products, a supplier provides a range of accompanyingservices. These services can be: services directly related to the product (i.e., warranty, spareparts, or product adaptations), appropriate customer information (i.e. providing the ‘rightinformation’ at the ‘right time’), and outsourcing a number of tasks to the supplier (i.e., sub-

assembly, design, or testing).

Delivery Performance: The capability to consistently meet delivery schedules (on-time delivery),to adjust to changes in delivery schedules (flexibility), and to consistently deliver the right parts(accuracy).

Time-to-Market: The supplier’s capability to reduce the customer’s cycle time and bring productsto market at a faster pace. For example, a supplier can reduce time-to-market for a customerthrough accelerating des ign work, developing prototypes faster than competitors, and speedingup the product testing and validation process.

Supplier Know-How: Manufacturers benefit from a supplier’s expertise in several ways. First, thesupplier’s knowledge of the supply market may provide an opportunity to present the customerwith new sourcing solutions. Second, a thorough understanding of the customer’s operations

creates an opportunity for the supplier to assist the customer in improving existing products -both in terms of functionality and costs. Third, a supplier may assist the customer in developingnew products.

Personal Interaction: Though business relationships exist between firms, they are actuallymanaged by individuals. Personal interaction in a manufacturer-supplier relationship may createvalue in different ways such as improved communication between both parties, more effectiveand e fficient problem resolution, and a better understanding of each partner’s objectives in therelationship.

Price: Direct product costs, i.e. the actual price charged by the supplier for the main product sold.A supplier’s product may be priced higher than the product of an average supplier (i.e. thecompany would obtain a ‘low’ score on this criterion from a customer perspective). Also, thesupplier may align his prices w ith an average market price (score ‘same level as average

supplier’). Finally, a supplier’s product may be priced lower than the product of an averagesupplier (i.e. the company would obtain a ‘high’ score on this criterion).

Process Costs: All costs associated with obtaining and using a product in the manufacturingprocess (excluding the actual price paid for the product). Process costs include acquisition costs(i.e. inventory costs, order-handling costs, and costs for incoming inspections) and operationcosts (i.e. costs for using the product in the production process such as downtime costs or costsfor tooling). A supplier may have higher process costs than an average supplier (i.e. the companywould score ‘low’ from a customer perspective). A supplier may just be average (score ‘samelevel as average supplier’). Finally, a supplier may be very successful at keeping process costslower than an average supplier (score ‘high’ from a customer perspective).

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Evaluation of Potential Suppliers