Procurement Management and Global Sourcing

Topic 3 – Supplier Evaluation and Selection

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Topic 3 – Supplier Evaluation and Selection i

Contents

Contents ii

Introduction 1
Learning objectives 1

Sourcing Process 2

E-Sourcing Models 11

Summary 13

ii Procurement Management and Global Sourcing

Introduction
The most important process performed in organisations today is the
evaluation, selection and continuous measurement of suppliers. There are a
number of aspects which contribute to the selection decision and process.
Enlightened purchasers commit major resources to this process, Identify
ways to reduce the cycle time associated with evaluation and selection. A
sound supplier selection decision today can reduce or prevent a host of
problems tomorrow. It creates, rather than fearing, future, reinvests part
of its profits into R&D with a long-term view and meets stringent financial
stability criteria when evaluating new customers for credit. Swift & Gruben
(2000, p,503) argue, “The purpose of supplier selection is to determine the
optimal supplier who offers the best all-around package of product and
services for the customer”.
There is no “one best way” to evaluate and select suppliers. The overall
objective is to reduce sourcing risk and maximize value to buyer. The
supplier should be selected for long-term which can involve intensive effort
and major commitment of resources.

Learning objectives
At the conclusion of this topic you should be able to:
• Map supplier sourcing process
• Determine supplier evaluation and selection process.
• Assess critical issues in supplier selection.
• Administer supplier evaluation and selection process for competitive
bidding process

Reading
Prescribed Text: Monczka, R.M., Handfield, R.B., Giunipero, L.C. and
Patterson, James L. (2014), Purchasing and Supply Chain
Management, South-Western, Cengage Learning. 6th Edition. Chapter
7
Khan, Shahadat. (2003) Supplier Choice Criteria of Executing Agencies
for Foreign Aid Funded Projects in developing countries, The
International Journal of Public Sector Management, 16, 4.
[Link]
1108/09513550310480033

Topic 3 – Supplier Evaluation and Selection 1

Sourcing Process

a. Recognising the Need for Supplier Selection

The organisation needs determine whether they need to go for a new
supplier. For example, as described in Topic 2, for a product under the
class of “straight rebuy”, an organisation may consider to continue, and if
needed assist in improving respective suppliers capability, instead of going
for a new one. However, in the case of a “new buy”, the organisation may
need to search, evaluate and select suppliers.

b. Identify the Key Sourcing Requirements

Once it is decided to go for a new supplier, the purchasing staff, in-
conjunction with other members of “buying center” (refer to the discussion
on buying centre in topic 2) determine the criteria to select suppliers. In
other words what a buying organisation will be looking for in its suppliers.
What are you looking for in a supplier? Some of the common criteria are
quality, cycle time, responsiveness, delivery performance, technological
capabilities and design support. Price or cost of products certainly is an
important criteria, however, an efficient buyer needs to look at suppliers’
capabilities in terms of other criteria before considering price. Price
offered by the potential suppliers also needs to be considered in terms of
other factors applicable to the concerned, some of these are mentioned
below:
• Lead time
• Returns from customers if the item has caused poor performance in a
higher value item;
• Machine downtime in the factory;
• Lost labor time and cost;
• Potential safety problems or litigation.

c. Determine Sourcing Strategy

There are a number of options, depending on the requirements of a
particular purchase deal, available to an organisation in respect to sourcing
strategy.
• Single source vs. multiple sources.
• Short-term vs. long-term contracts.
• Domestic vs. foreign supplier.
• Short-term versus long term procurement contracts
• Collaborative versus Traditional Relationship

d. Identify Potential Supply Sources

Searching for potential suppliers is often a difficult task, particularly for
2 Procurement Management and Global Sourcing
new products. Companies use a variety of ways in doing so. Some of these
methods including the use of trade directories (online based sites included)
and professional association contacts.

e. Limit Suppliers in Selection Pool

Purchasers often perform a first cut or preliminary evaluation of potential
suppliers to narrow the list a time and resources prohibit in-depth
evaluation of all suppliers

f. Developing Supplier Evaluation Criteria

It is important that an organisation deploys adequate resources at the
planning stage to develop criteria to select suppliers. The criteria can be
financial or non-financial. In many cases, non-financial criteria (for example
supplier’s capacity to maintain quality) could become the most important
criteria. It is suggested that if you are in charge of a purchase, devote some
time in researching the sort of criteria would be required to achieve your
goals. According to Shipley & Prinja (1988), three broad criteria of supplier
selection criteria should be selected. These are (i) basic economic criteria,
(ii) channel relationship influences and (iii) distributor support influences
were found to be influential in industrial distributors vendor choice.
According to Khan, Shahadat (2003) and Karande, et al. (1999), the criteria
can be selected in five categories. There are (i) economic, (ii) reliability of
the supplier (iv) familiarity with supplier (v) other capability of supplier.
{refer to Khan, Shahadat (2003) and other research articles cited there for
a list of supplier choice criteria). It is suggested that in finalising the
criteria to apply for a specific purchase deal, other members of buying
centre especially the user and other related departments should be
consulted.

g. Determine Method of Supplier Evaluation

Once the pool is reduced you must decide how to evaluate remaining
suppliers. A cross-functional team often evaluates suppliers. This includes a
review of information provided by supplier’s information. In many cases,
purchasers request for proposals (RFP) from potential suppliers. A request
for proposal is more successful if the purchaser clearly identify their needs
in terms of specification of goods or services, and the other desired
capabilities of suppliers are clearly outlined in such request. Evaluation of
suppliers may also include on-site supplier visits, information or
recommendation from third-party. Other than competitive bidding (see in
Topic 2 for requirements of competitive bidding), most selection of
suppliers requires negotiation between two parties. Petroni & Braglia, M.
(2000), argue that it is essential for vendors to identify the type of decision
rules that are being used to evaluate the potential vendors. Differences in
different buyers evaluation attributes warrants that an industrial vendor
must identify which attributes are important and focuses on those for a
given industrial buyer.
For evaluation of suppliers under competitive bidding, the purchaser may
use non-compensatory method of evaluation or compensatory method of
evaluation which are described below:
Topic 3 – Supplier Evaluation and Selection 3
 Compensatory rules involve all information about each alternative being
combined together into one rating, such that a good aspect on another can
compensate for a poor aspect on one attribute. Alternatives are chosen on
the basis of these combined ratings.
In contrast, non-compensatory rules are based on only a subset of the
information, with each aspect often processed in a simpler way. The
decision maker has a minimum acceptable level for each attribute and
immediately rejects an alternative if it falls below this level. Once
rejected, the alternative is omitted from all further consideration.

h. Selection of Suppliers and Reach Agreements

Once the evaluation is completed purchaser and suppliers usually signs
formal contracts. Contracts mean different things to different people, and
their legality and ability to be enforced will also vary due to the differences
culture and in legal systems within and between countries. For example, in
some cultures a “handshake” is viewed as a contract because the parties
have given their word to each other about the agreement/s reached. If a
written contract is signed, some of the aspects need to be carefully
addressed.

i. Other Considerations

Legal Considerations

Purchase orders and agreements made with suppliers are usually regarded as
contracts, and are therefore binding legal agreements between buyer and
seller. Most countries have some form of legislation or guidelines about
these, sometimes known as “contract law”. Terms and conditions for
purchase need to be carefully considered, negotiated and included in the
contact. However, in case of RFP of competitive bidding, these may be
written in the RFP or bid documents, therefore unless changed or
negotiated otherwise, these can be part of the contract. However, be
aware that there are different legal systems in different countries, and
sometimes in different states or territories within countries, so it would be
wise to consider those issues when making purchase arrangements, as they
may not be the same as for the location in which you are based.

Quotations

Organisations often like to obtain quotations for goods or services, even if

there is not a formal tender or competitive bidding process. Suppliers asked
for quotations still have to put some time and effort in to preparing
them, so try to minimise the waste for suppliers if you are really not
likely to use particular ones. Sometimes your company may have a
policy (eg "obtain three quotes for all expenditure over $100"). If the
policy is rigidly enforced, you will have to obtain the quotes, or
subsequently renegotiate the company policy. Quotations include
costs, and details of the product or service being quoted upon. However it
is unlikely that the supplier will have to provide financial details of his
company such as that required in some tender processes.

4 Procurement Management and Global Sourcing

Purchase Orders

Purchase orders set out the arrangements made for the supply of goods or
services. Many companies use pre-printed paper based forms which they
have designed themselves or bought from a stationery supplier. Details of
the goods or services are then entered onto the form, which usually has
several copies for purposes such as:
• Original: send to supplier;
• Copy 1: for Accounts Department (so they are aware of committed
expenditure);
• Copy 2: for Inwards Goods Store (so they know what goods to expect and
when);
• Copy 3: for filing in Purchasing Department (as a record, and to follow up
when items are due or overdue).
Different companies will have different procedures, so the number of
copies and the purposes for which they are used may vary. Where
electronic purchase orders are used, the “filing system” may be the
computer.
Information contained in purchase orders includes:
• Purchase order number (often pre‐printed on your standard form);
• Purchase order date;
• Vendor name, street and/or post office address, telephone and fax
numbers, e‐mail address;
• Contact name of person (if there is someone specific you have been
dealing with);
• Item required (description, and part number where appropriate);
• Quantity required;
• Unit of measure (eg kg, each, litres);
Note: Sometimes the unit of measure ordered is different to the unit of
measure for pricing, eg price $50 per kg, but amount ordered is only 10
grams).
• Price (eg $.... per kg, each etc.);
• Price terms (eg FIS, C&F ‐ explained in later sections of this book);
Delivery date required;
Street loading dock), particular carrier/s to use, transport payment
arrangements;
• Special instructions: (eg must conform to specification number......
dated......; sample must be submitted prior to mass manufacture);
• Sales tax or other tax information or declaration (depending on your
country’s regulations in this regard);
• Confirmation of previous order (eg if you have telephoned the order, the
purchase order should be marked “Confirmation” so that it is not
accidentally supplied twice);Acknowledgment requested (eg if you require
the supplier to acknowledge receipt of the order and confirm that the
terms and conditions are agreeable);

Topic 3 – Supplier Evaluation and Selection 5

 • Terms and conditions: often printed on the reverse side of the purchase
order, and prepared by a solicitor/lawyer on behalf of the company (see
separate section later in the text);
• Signature and name of the person approving the purchase order.
As disputes can sometimes arise over what has been agreed, the purchase
order can be a crucial reference document. If the supplier has however not
received confirmation in writing or electronically about your requirements,
your legal position may not be as strong as it could have been. Your
company may have a policy or procedure established which outlines the
way in which purchase transactions should occur.

Blanket Orders and Call Offs

In some situations such as items of straight rebuy, you will be requiring the
same item to be supplied frequently by the same supplier. Writing out a
detailed purchase order for each occasion can become time consuming and
costly to both your company and the supplier.
A “blanket order” is similar to the purchase order, but provides more
flexibility. For example, you may negotiate the transaction, establishing
pricing, specifications etc., but delivery dates and quantities may vary.
Your purchase order may then specify a total quantity over a nominated
period (such as your anticipated usage for a one year period), and indicate
that “delivery details will be as advised separately”, or words similar to
that, depending on your individual requirements.
The “call offs” occur when you arrange with the supplier to deliver
particular quantities at specified dates, times and locations. You will
probably refer to the blanket purchase order number (so that you are both
aware of the pricing etc. to be applied). The “call offs” may be by
telephone, fax, electronic communication whatever means you and supplier
agree upon.
You will probably need to maintain a record of some type (manual or
computerised) of the “call off” arrangements made, so that you know when
to expect the goods, and the progressive total you have ordered, in case
the amount exceeds, or is considerably less than, the blanket order
originally provided. Where a difference is identified, you may need to
renegotiate with the supplier.
You and the supplier will probably have come to an agreement about how
much notice (lead time) is needed between when you “call off” the product
or service and when it is delivered. You may have agreed that the supplier
will hold a certain amount of stock at the supplier’s premises in readiness
for immediate delivery.
Be aware that your purchase order has committed you to buying the goods
and quantities specified, so if you later change your mind, and your supplier
has manufactured the items on the basis of the order, you may have to still
buy the goods.

Tenders

When tenders are called for, whether by government or private companies,

the process may be conducted in several ways, including:
• open advertisements in newspapers, business magazines, or other media
6 Procurement Management and Global Sourcing
 (sometimes referred to as an “open” tender because any organisation can
respond);
• contacting a selected list of suppliers to invite them to tender (sometimes
called a “closed” tender because suppliers cannot tender unless invited to
do so).
Prior to tenders being called, a detailed tender specification document
usually has to be prepared. This will specify the key aspects to be
considered, which may include:
• technical requirements;
• timeframes (for the tender process and the actual project or item being
tendered for);
• location of work or delivery point/s;
• viability of the supplier (financial details may be requested to ensure the
supplier can finance the necessary parts of the project);
• how the selection process will occur;
• contact point for any queries.
When suppliers submit their response to tenders, it usually has to:
• be very detailed, responding to each tender document item;
• include quotations for the work/service provided;
• provide cost justifications for the quotation;
• include details of how and when they intend to fulfil the tender if it is
awarded to them;
• identify the staff to be used for the work/service;
• provide financial records of the supplier’s company for the past several
years.
Sometimes an additional step is inserted prior to the detailed tender being
sought, particularly when there may be a wide range of potential suppliers
interested. Preparing tender documentation, and responses to tenders, can
be a very time consuming and costly process.
An “Expression of Interest” may therefore be considered. This can again be
“open” or “closed” (like the tender), but is more likely to be “open”. It will
require suppliers to submit a shorter document than a detailed tender, but
guidelines will still be provided by the purchaser. Many of these guidelines
will be similar to those outlined in the tender discussion above, but may
exclude the need for some items.
A shortlist of potential suppliers will then be established from the
“Expression of Interest” (with selection criteria agreed by the selection
panel), and one or several suppliers are then invited to submit detailed
tenders. The other suppliers should be notified that they have been
unsuccessful. Sometimes the unsuccessful suppliers are not notified at all,
but the public relations consequences of this need to be considered. If
suppliers have gone to the effort to show interest, it is probably
appropriate to formally advise them of the outcome.

Terms & Conditions of Purchase

Terms and Conditions of Purchase, as mentioned previously, are usually

Topic 3 – Supplier Evaluation and Selection 7
 printed on the back of a purchase order. It is important to compare your
Terms and Conditions with the Sales Terms and Conditions of your supplier,
as they can at times be contradictory. For example, you may say your
payment terms are 60 days, and the supplier may be specifying 7 days.
The content and wording of Terms and Conditions will vary by company, but
some aspects to consider for inclusion are noted below:
• confidentiality/secrecy provisions (especially when a new product or
component is involved, and including consideration of patents, design
registrations);
• guarantees, warranties, return of goods and claims
• action to be taken for late, incorrect and sub‐standard deliveries (and
penalties, if any);
• conditions of use when tooling or other equipment, paid for by the
purchaser, are to be utilised by the supplier (eg must solely be for the
purpose of exclusive supply to the purchaser, and may not be sold to
anyone else);
• payment terms;
• delivery terms (eg considered to be free‐into‐store unless otherwise
specified on the purchase order);
• standard of storage, packaging and transportation required;
• settling of disputes;
• ownership of goods (time at which ownership is transferred from supplier
to buyer).

Insurance

Whether you are purchasing goods from a local or international supplier,

insurance arrangements need to be considered. When goods are being
transported, the vessel, truck or whatever transportation is being used, can
have an accident, and all or some goods become lost or damaged. Who
pays? Who is responsible? This needs to be considered in your Terms and
Conditions of Purchase, but you also need to carefully read the Terms and
Conditions relating to the transport companies and methods involved.
Once you receive the goods, your organisation should be adequately insured.
You may even have been asked to arrange the company’s insurance policy,
so you need to be aware of its implications. For example, if you have just
placed an order for $1 million of goods, and you know your insurance policy
will only cover $200,000, you have a problem of a “gap” and some questions
need to be answered, such as ‐ hope for the best, increase the policy ‐ for
the short term only, or for how long, change the policy to incorporate
dangerous or hazardous goods if they are involved?
Sometimes companies take insurance on currency exchange rates to try and
minimise losses. Here a risk assessment needs to be undertaken to
determine whether the cost of the insurance is higher than what you may
lose.
If in doubt about insurance, speak to insurance brokers and/or companies,
risk managers and/or assessors, and your company’s senior management.
When you speak to people asking for advice, recognise that some of the
advisers may receive a financial benefit if you then proceed with what they

8 Procurement Management and Global Sourcing

have recommended. Therefore, try and assess the information carefully,
and take the decision which is in the best interests of your company (which
may not necessarily be the cheapest price quoted).

Penalties

Some contracts have penalty clauses which set out what penalties (usually
money) will apply under what circumstances. Some examples of situations
to which penalties could apply are:
• late deliveries;
• faulty or damaged goods;
• incorrect pricing;
• incorrect documentation.
Penalties are usually viewed as a deterrent to deter (stop) people from
“doing the wrong thing”. Very rarely are bonuses given to suppliers for
“doing the right thing” “the right thing” is what was agreed and is
expected!
If you intend to utilise penalties, they should be clearly established in your
negotiations with suppliers before you have placed the order. To try and
implement the penalties afterwards, when something goes wrong, and
without notice, would probably be seen as a breach of faith and trust in the
relationship, and will not encourage improved ongoing relations. (Of
course, the supplier not meeting expectations also would not help the trust
relationship!).

Expediting

Expediting basically means “following up”, and is usually required because

the products ordered for a particular date have not arrived, or are not
expected to arrive on time (eg if supplier is unreliable or there has been
advice of a problem which may affect delivery).
With reliable suppliers, expediting should very rarely be needed. However,
some suppliers are not reliable (why are you dealing with them?), and
exceptions or unexpected problems can occur.
Some companies expedite in advance ‐ contacting their suppliers prior to
the delivery date to check that the goods will arrive at the time and on the
date previously arranged.
Typical things to check when expediting:
• Has your organisation (eg inwards goods store) received the goods, but you
have not yet been advised?
• Has the supplier delivered the goods and you just aren’t aware of it?
(Sometimes company internal communication systems are not very good,
or perhaps someone accepted the goods and put them where no‐ one else
can find them.)
Note: If you start accusing the supplier of not delivering, when the delivery
has actually been made and it’s your company’s problem for not having
proper systems, the accusation will not help build a trusting relationship.
Consider confirming with the supplier first whether the goods have in fact
been delivered.
Topic 3 – Supplier Evaluation and Selection 9
 • If the goods have not been delivered, enquire when they will be delivered.
• Check what implication the new delivery date has for your company.
• Ask why the goods are late. (Your company may have caused the problem!)
• Attempt to renegotiate a better date if the date given is going to cause
significant problems for you and explain why you need them earlier (or
perhaps arrange a split delivery part on one date, and balance at a later
date).
• Ask if there is anything you and/or the supplier can do differently to
overcome this type of problem for the future.
If you find that you are constantly expediting for goods from the same
supplier, it is possible that one or more of the following is relevant:
• The lead time allowed is understated and needs to be revised;
• There has been a misunderstanding (communication problem) between you
and the supplier about what was required;
• The transportation arrangements in place need changing;
• The supplier’s supplier is unreliable and may need to be changed;
• Your supplier is unreliable and may need to be changed.

Dishonest Suppliers

We believe everything our suppliers tell us because it is absolutely true!

Wouldn’t that be terrific! Many suppliers are honest and trustworthy in
their dealings ‐ but unfortunately some are not. Sometimes suppliers can
make honest mistakes, but sometimes they mislead intentionally ‐ about
delivery dates, costs, product quality, etc.
If suppliers are dishonest, you and your company have to make decisions
about whether to continue dealing with them, and whether there is any
matter over which you need to consider taking legal or other action.
However, your suppliers will also have an expectation of honesty from you.

Discounts

When purchasing items, discounts are sometimes available, and may be in

forms such as:

• discount for volume (in the form of price being structured to reflect the
volume being purchased);
• discount for early payment ‐ if you pay earlier than the usual time, you can
deduct a certain percentage from the account (e.g. 2.5% for payment
7 days, when terms are usually 30 days);

• discount on discontinued or short shelf‐life items (but beware ‐ such

discounts are only worthwhile if you are going to USE the item; they are not
a bargain if you ultimately throw them out!)
Discounts can sometimes be negotiated, even if they are not initially offered
by the supplier.

10 Procurement Management and Global Sourcing

 Goods Pick‐up From Supplier

As referred to earlier in this book, often the terms of purchase will require
the supplier to deliver goods to your organisation, or another specified
location. The cost of that transport, including handling costs (eg booking
fees) will be part of the total price you pay for the goods (whether transport
is itemised separately or not).
Some companies which have negotiated very attractive freight rates with
their carriers (eg large companies with considerable “purchasing power”)
may decide that the overall product cost can be reduced if their own carrier
picks goods up from the supplier, rather than have the supplier deliver.
Apart from cost considerations, there is the control factor. The purchaser
may be able to control the days and times on which goods are available
from the supplier, because reducing the supplier’s overall costs should be an
attraction. However, some suppliers may view this unfavourably, because it
impacts on their (perceived) flexibility and pricing negotiations undertaken
with their own transport company.
Thought also needs to be given to when the “ownership” of the goods
changes hands ‐ if the purchaser is paying directly for the transport, the
purchaser may become owner of the goods at time of pick up, rather than
at time of delivery if goods are transported by the supplier’s transport. This
may not necessarily be the case, but it is worthwhile considering the legal
and insurance implications of such arrangements. Also, some suppliers may
not be comfortable with the alternative arrangement, and changing it may
not be worthwhile if you are potentially going to lose a good supplier.
The time difference between pick up and delivery, if minimal (eg a few
hours) may not be an issue, but if it is several days (due to long travelling
distance), it could have an impact on your cash flows and levels of
inventory.

E-Sourcing Models
E sourcing entails identifying, evaluating, negotiating and configuring
supply across multiple geographies to reduce costs, maximize performance
and mitigate risks. E Sourcing is also a cornerstone of total cost
management (TCM), a technological and process framework for the optimal
alignment, management and control of the total cost of ownership (TCO) of
supply relationships ([Link] accessed 30 November
2014).
E-sourcing systems can be divided into of sell-side systems, buy-side
systems, and third-party marketplaces. Sell side system contain products or
services from one or more suppliers. Typically free registration to users,
supplier guarantees site security, no investment by buyer, ease of access to
many suppliers, inability to track expenditures or to control spending and
offer varying degrees of security. Buy-side systems, on the other hand, are
controlled by buyers and tied into their intranets and extranets. This
systems may be either self-designed or acquired through e-sourcing suite
suppliers, allow supply manager to manage sourcing cycle, track spend, and
exert control of contract management in secure environment, and requires
initial investment and periodic updates. Third-party marketplaces facilitate
Topic 3 – Supplier Evaluation and Selection 11
 electronic purchasing process. These are independent firms who neither
buy nor sell goods and services but bring buyers and seller together in
cyberspace. E-Sourcing suites transmission of product specifications,
submission of bids, acceptance of contracts, inspection and receiving
documents, accounting audits and submission of payment.

SRM Systems
E-sourcing helps in supplier relationship management (SRM) by focusing on
decision support around broad group of transactions, using both data and
structured mathematical modeling, interactive systems to assist in supplier
selection, contract management and contract compliance

Few more Aspects e-sourcing

• RFQ processing: Request to submit proposal based on set of specifications

provided by buyer. These are also known as Also known as eRFx module,
Request for information (RFI), Request for proposal (RFP) or Request for
quotation (RFQ).
• Reverse auctions: Electronics process where multiple sellers bid for
business of single buyer. These results in price reductions, regular reverse
auctions vs. rank reverse auctions, can often alienate suppliers by its focus
on price only. There are several steps in a reverse auction. These are
buyer decides which commodities to consider, suppliers initially evaluated
and invited to participate, buyer writes RFQ and sends to all qualified
suppliers, bidding process is conducted and finally buyer analyzes results
and rewards business to chosen supplier(s). A number of way reverse
auction can be administered. It can be administered on a self-service or
through full-service third party provider. Third party provider helps with
selection of commodity, assists in supplier qualification, provides training
and conducts auction.
• Purchase Order Issuance: E-sourcing also helps generation of purchase
orders (P.O.) automatic assignment of consecutive P.O. numbers, transfer
of P.O. information to proper database(s) and provides P.O. visibility and
control.
• Supplier Performance Measurement and Control: E-sourcing assists in
providing visibility to open-item status, measures and analyzes supplier
performance, use of electronic scorecards, automatic inquiry of item
status, monitoring of order due dates, analysis of supplier performance,
capability to monitor planned receipts against due dates, provide
immediate visibility to past-due items, flag items likely to become past
due and generate summary reports and compare to predetermined criteria.
There are several benefits of information visibility systems, such as
suppliers are aware of buyer’s needs in timely manner, buyer is assured
that shipments are received on time, every time, allows problems to
become more visible earlier, improved processes, breaks down
organisational barriers, enables sharing of mission-critical information
about business activities, builds in supply chain visibility, manages by
metrics and reduces decision cycle time.

12 Procurement Management and Global Sourcing

Summary
This section addressed the supplier evaluation and selection-the most
important procurement function. Organisations are increasingly emphasising
on this function, as an adequate supplier selection process saves
organisations from a host of supplier related problems in the future. A well-
developed supplier selection process also helps organisation to apply
consistent approach in selecting supplier. Critical to this process is to
design applicable supplier choice criteria and recession rules for better
coordination of the selection process.
The next session outlines inventory management in relation to
procurement.

References
Handfield, R. B., Monczka, R. M., Giunipero, L. C and Patterson,
James L. (2011), Sourcing and Supply Chain Management, Cengage
Learning, Fifth Edition (International Version).
Karande, K., M. N. Shankarmahesh, et al. (1999). "Marketing to
public- and private-sector companies in emerging countries: A study
of Indian purchasing managers." Journal of International Marketing
7(3): 64-83.
[Link]
g/stable/25043056
Khan, Shahadat (2003). Supplier Choice Criteria of Executing
Agencies for Foreign Aid Funded Projects in developing countries, The
International Journal of Public Sector Management, 16, 4.
[Link]
.1108/09513550310480033
Monczka, R M., Handfield, R. B., Giunipero, L. C and Patterson, James
L. (2011), Purchasing and Supply Chain Management, South-Western,
Cengage Learning, Fifth Edition.
Petroni, A., & Braglia, M. (2000). Vendor selection using principal
component analysis. Journal of Supply Chain Management, 36(2), 63-
69.
[Link]
.1111/j.1745-493X.2000.tb00078.x
Shipley, D., & Prinja, S. (1988). The Services and Supplier Choice
Influences of Industrial Distributors. The Service Industries Journal,
8(2), 176-187.
[Link]
[Link]/[Link]?direct=true&db=bth&AN=6422206&site=ehost-
live&scope=site

Topic 3 – Supplier Evaluation and Selection 13

 Online Discussion Activity
Based on Topic 3, the theme is "How we can develop selection criteria
to evaluate and select supplier(s)?". Watch the supply chain scenario
at: [Link] and develop a
list of criteria for supplier selection and evaluation other than price,
quality and on-time delivery for McDonald’s beef supplies. You are
required to read relevant study materials of topic 3 (Topic notes,
relevant chapter of text book and research articles) on supplier
evaluation and selection.

14 Procurement Management and Global Sourcing