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WHAT IS VENDOR
Vendor means a person (or company) who sells and supplies
his (or its) products.
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A few questions are tobe answered before
attempting to develop vendors
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Based on the answers, a list of potential supplier is drawn.
For the purchase of items that are of repetitive nature, a
detailed evaluation procedure of suppliers is adopted. For a
one-time purchase, elaborate inquiries and evaluation
procedures may not be necessary.
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VENDOR DEVELOPMENT INVOLVES
FOUR STAGES:-
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Survey stage-source of information on
potential vendors
Survey stage-source of information on potential vendors
Survey involves collecting information on different suppliers
of the desired materials. The following sources may be
consulted:
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Trade journals:- These contain advertisements of the
materials related to specific industries, namely chemicals,
plastic , steel etc. these journals can be subscribed, relevant
information can be classified, indexed, updated and
maintained in proper files by the buyer.
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Suppliers catalogues :- many manufacturers periodically
publish catalogues and pamphlets giving details of the
products they manufacture. These catalogues contain
considerable technical information, specifications, prices etc.
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Inquiry stage- selection of potential
suppliers :
After a list of possible suppliers is complied, the next step is
to inquire a few of them further. It involves a detailed analysis
of supplier’s activities furnished by vendors or collected by
the company.
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Technological competition
Service competition
Price competition
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Internal facilities of vendors:- Adequate facilities are
essential for the manufacture and quality control of items.
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• Financial adequacy and stability:- the financial status of
the vendor company and relations with his bankers should be
explored, so that items can be produced and supplied
without any financial difficulties at any stage. For this
purpose, previous years balance sheets of the company are
helpful.
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Reputation of the vendor: Methods of selling and
distribution network are important. The supplier ‘s
reputation in the market in regard to prices and promises of
delivery dates should be considered.
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Vendor Rating:
A few ways by which a vendor can be evaluated are
listed below:-
1) categorical method
2) weighted point method
3) cost ratio method
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Categorical method : The buyer prepares a list of factors,
which are considered necessary for evaluation.
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The format such a report is given:
Factors Grading
5.Willing to accommodate
when production
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schedules are suddenly
Factors Grading
6.Helps in
emergency
7.Behavior is
courteous and
considerate
8. Reasonable in
Pricing
9. Miscellaneous
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Each supplier is evaluated and a number-score is calculated.
80-100 Excellent
70-80 Good
60-70 Average
Quantity 50 points
Delivery 30 points
Price 20 points
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Total points 100
The performance of each factor is separately quantified.
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For example, costs relating to quality works out to be Rs
2,000 and the total worth of material purchased is Rs 2.0
lacks per year Quality cost ratio = 2,000 : 2,00,000, (i.e., 1%)
Similarly, when the cost of delivery is Rs. 1000 then Delivery
cost ratio = 1,000 : 2,00,000 (i.e., 0.5%)
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U sing the methods mentioned above, a buyer can
better judgment over retaining the vendors.
exercise
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We can understand vendor rating by this example:
Ex. The following information is available on 3 vendors: A,
B and C. Using the data below, determine the best source of
supply under weighed point method and substantiate your
solution.
Vendor A: Delivered 56, lots 3, were rejected 2 were not
according to the schedule.
Vendor B: Supplied 38, lots2 were rejected 3 were late.
Vendor C: Finished 42, lots 4were defective 5 were delayed
deliveries.
Give 40 for quality and 30 weightage for service.
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Solution: Quality performance (40% weightage)
= (quality accepted/total quantity
supplied)*40
Delivery performance:
X, Adherence to time schedule(30%)
=(no. of delivery on the scheduled date/total
scheduled deliveries)*30
Y,Adherence to quantity schedule(30%)
=(no of correct lot size deliveries/tot no of scheduled
deliveries)*30
Total Vendor Rating =X+Y
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Vendor A= (53/56)*40+(54/56)*30 =66.78
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BUYING TECHNIQUES :
Purchasing involves procurement of materials, machinery an
services needed for production and maintenance.
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Price is defined as the amount of money at which a thing is
valued or the value that a seller sets on his goods in the
market.
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Quotations:
Quotation is an inquiry to know whether the vendor can
supply the desired material and if so, by what price.
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At the top of this form, the words ‘THIS IS NOT AN
ORDER’ is printed
The quotations are valid for at least one month from date of
opening.
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Generally materials are bought by one of the following
techniques:-
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This method is suitable for the purchasing of office
stationery and computer peripheries.
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Floating a limited enquire :- This method is used when the
value of purchases is small. The company sends letters to a
few reliable vendors requesting for prices, analytical reports,
and other details for a particular material.
- single tender
- open tender
- closed tender or limited tender 38
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S ingle tender : Single tender is invited from one
reliable supplier, under certain conditions.
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Open tender : Open tender method is used when the value
of purchases is high. When supply sources are not known or
intended to locate more supply sources, open tender ( or
public tender ) is used. Open tenders are very expensive.
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Variations in quantity to be purchased are possible.
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Process of negotiations : negotiations take place between two
individuals or two sets of individuals.
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When the bills are cleared immediately after delivery, the
supplier gets finance for his activities.
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Types of discounts :
Materials may be purchased in three ways.
1. Volume contract
2. Deals
3. Discounts
.
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Volume contract : this type of contract is employed to cover
total purchase of ampoules, bottles and other accessories.
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Such contracts are executed for a period of one year.
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Flow Chart of vendordevelopment process
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THANK YOU
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