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The process of effective supplier evaluation is vital to the procurement process and a fundamental pre-requisite of a total quality output from the organisation. Total quality cannot be achieved without quality inputs. It has long been appreciated that the logic of the process diagram (see Figure 1) cannot be refuted. (Figure 1 omitted)
The output of our suppliers (which is a function of their own subsequent inputs and processes) provides the buying organisation with the majority of its inputs, eg raw materials, spares, goods for resale. We can also include in this list a growing list of services, including training, maintenance, catering, pay-roll. In fact, as organisations in the 1990s concentrate more and more on the concept of 'core business' which I would define as, 'those activities and processes that can be provided by the organisation with a significant competitive advantage and which relate to the organisation's key purpose and mission', this list of outsourced resources will continue to rise. The current trend toward outsourcing in the public sector is a good example. However, before activity can be contracted out, there needs to be careful consideration of its suitability and its impact on the organisation. Figure 2 indicates two of the main dimensions of the decision and how they interrelate as the options available. (Figure 2 omitted)
Much of the Japanese success in manufacturing can be linked directly to processes of selection and managing its supplier base.
Much of that success is underpinned by the care and detail that is a feature of Japanese-style supplier evaluation and selection process.
One of the fundamental drawbacks of the traditional procurement process (emphasis on price and lowest tender) is that it limited the procurement professional's ability to take into account the intangible factors. A more commercial and professional approach allows for a more comprehensive evaluation to take place, examining the 'totality of features' rather than one particular aspect.
To enable a thorough review of that totality, we need to identify what the constituent parts of that totality are and proceed to develop...