3. Introduction
Price was considered primary base for procurement
decisions, and business contracts were awarded to the
lowest bidder in 1980s
Vendor rating is a tool
Insures quality in the supply chain
Supplier quality management is essential for improved
operational performance
4. Origin: To improve the overall performance, many firms
are focusing on their
core
competencies
and
outsourcing non-core activities
Specifying
Communicating
Dynamic
monitoring
5. Increased outsourcing: increased the reliance of buyers on
their suppliers
Need for effectively managing supplier performance
capabilities
Strategy for improvement
7. Capability and selection of vendor, report of the visiting
team and analysis of vendor questionnaire is used
A tools for benchmarking their supplier’s performance
8. Objectives
The system for assessing the performance of one vendor in
comparison with others
To reduce large amount of data into manageable
information for decision making and to identify future
trends
9. Functions
Provide objective, qualified measures of supplier’s
performance
Aid in arriving at a balanced judgment of supplier’s
performance for all categories of buyer needs
Provide both buyer and supplier with common factual
information on overall performance
Minimize the risk of being stampeded by isolated
instances of failure
Provide the supplier with a detailed and factual record
of problems for corrective action
10. Enhance the relationship between the customer and the
supplier
Draw a comparative scale that can be used for
vendor selection and distribution of the requirements
Update quality plan to most economic levels either by
increasing or decreasing amount of inspection
Discontinue the vendor in case of consistently poor rating
Improve effectiveness of supply chain management
12. Vendor Rating: Industry Practices
Based on data provided by 33 organization
In sample 24 were using weighted plan and rest 9 were
using categorical plan
Comparison of Elements and their Weightages
S. No.
Element
% Weightage – Industries
%
30-40
No. of
Organizati
ons Using
Element
24
35
0
Weightage –
Authors
(Range)
1.
Quality
2.
Cost
3.
Delivery
4.
Service
25-30
Range
Mean
40-100
66.875
–
Standard
Deviation
19.77
–
–
19
20-60
37.894
11.219
05
10-20
13.333
5.773
13. Weightages for Sub-Elements – Quality
Sub-Elements
(Quality)
No. of
Maximum
Organizations Weight (%)
Minimum
Weight (%)
Mean
Standard
Deviation
Quantity accepted
19
1.00
1.00
1.0
0
Quantity accepted with
deviation
10
0.75
0.25
0.6
0.184
Segregated and accepted
quantity
6
0.95
0.75
0.8
0.077
Segregated,
reworked and
accepted quantity
10
1.00
0.25
0.6
0.200
Quantity rejected
12
0
0
0
0
14. Weightages for Sub-Elements – Delivery
Sub-Elements
(Delivery)
No. of
Organizations
Maximum
Weightage (%)
On-time delivery
13
1
0.4
0.82
0.273
5
1
0.5
0.67
0.288
Quantity reliability
Minimum
Average
Weightage (%)
Standard
Deviation
15. Observations
Five organizations have rated the vendors based on quality
performance alone
Some of them have had mentioning of technology and
innovation. It subtly stresses that
companies are also
assessing vendors based on technology transition to predecide further scope of work to be outsourced. One
organization has also mentioned third party certification and
Production Part Approval Process (PPAP).
Two organizations have awarded weightage criteria based on
criticality of repair and rework (major/minor/critical), this is in
line with IS: 12040-1987 guidelines
One organization adjusts the rating when the supplies are
modified and are used for alternative applications
Two organizations have been assessing multiple item
suppliers based on individual items rating leading to overall
supplier rating
16. Work stoppage incidents have been separately identified
for rejected components and for delayed deliveries
Only one organization has considered line rejections
One organization has been calculating overall vendor
rating by considering previous months performance
There is an isolated instance where there is a mention of
cost of quality
There are also separate instances of considering
customer
disruptions and special status customer
notification as a criterion for vendor rating
The 90% performance or rating levels can be reasonably
assumed excellent
17. Deming’s fourth point
Stop awarding business based on price tag alone (Deming,
1986)
customer satisfaction is closely linked with consistently
supplying quality as per schedule
Very few organizations have considered work stoppage
incidents, service performance, line rejection, criticality of
components and multiple component supplies
Electronic data processing systems may ease the work, but
it also will be limited to the compatibility and capability to
support the rating system
18. Conclusion
Vendor rating is an important defect prevention tool to be
used on the upstream (supply side) supply chain
It should be developed logically to suit the organizational
requirements
Companies should emphasize the importance of quality
and delivery performance not only to their suppliers, but
also to their (supplier’s) suppliers
Weightages recognized during study would help
organizations to understand the explicit and implied
requirements of their customers and decide the priorities
to develop the strategies for improvement in their vendor
rating
19. Reference
Mandave, H. A., Khodke, P. M., (2010). Vendor Rating: A
Tool for Quality in Supply Chain Management. The IUP
Journal of Supply Chain Management, VII(3)
21. Weighted point plan
Weightages Given by Authors (%)
Vendor Rating
Elements
Juran and Gryna
(1996)
Feigenbaum
(1991)
Sinha et al. (1985)
Quality
40
40
30
Cost
35
35
40
Service and
Delivery
25
25
30
Editor's Notes
used by the organizations to assess the performance of their vendors to ensure efficient and effective upstream supply chainas conformance to mutually agreed-upon requirements among the partner firms with the aim of improving the performance of the transactions taking place in the chain
2. for outsourced products and services3. Vendor rating is a tool used in this regard for‘specifying’, ‘communicating’, and ‘dynamic monitoring of the fulfillment’ of customer’s expectations.
1. When suppliers know what is expected of them and how they are evaluated, they can focus on developingpurchasing decision based on the lowest price may lead to more repairs and replacements, and in turn more overall cost of use of the product
Customers in the process of communicating their expectations to suppliers are using vendor questionnaire as a tool along with a visit to supplier’s plant by a team consisting of representatives from quality assurance, purchase, process planning, design, etc.Supplier or vendor rating system against the performance of similar suppliers serving the company
with a view to draw a comparative scale that can be used for vendor selection, distribution of requirements, management policy, quality inspection and developing long-term relationship
3. These elements may complicate the computing of vendor rating, as it requires more and updated record keeping
if it is used in an atmosphere of interdependence between the vendor and the customer. . In industrial market, a supplier’s overall rating is a reflection of the buyer’s satisfaction with a supplier.