Purchasing policy rating techniques

There are several rating techniques now being used. Whatever the technique, the vendors are assessed on the basis of a wide variety of factors or criteria, which might include but are not limited to the following:

* Price
* Discounts received.
* Maintenance of specifications,
* Compliance with other specifications,
* Promptness of delivery,
* Freight and delivery charges,
* Installation costs,
* Service,
* Market information,
* Co-operation,
* Management competence,
* Credit terms,
* Disposition of rejects,
* Employee training,
* Adjustment policies,
* Cost reduction suggestions,
* Inventory plans and
* Financial position.

A few important techniques of vendor rating are described in the following paragraphs.

Categorical Plan

Under this plan, personnel from various divisions maintain informal evaluation records. Individuals involved traditionally include personnel from purchasing, engineering, quality control, inspection and receiving. For each major supplier, each person prepares a list of performance factors, which are important to him. At a monthly meeting, each major supplier is evaluated against each evaluator’s list of factors. Each supplier is then assigned an overall group evaluation, usually expressed in simple categorical terms such as ‘preferred,’ ‘neutral,’ or ‘unsatisfactory.’

The categorical plan is simple, easy to operate and hence is the most commonly used technique.

The Weighed Point Plan

Under this plan, the performance factors to be evaluated are quality, delivery, price and services. They are given ‘weights’ for instance, quality might be weighted 25, delivery 20, price 30 and service 25. The weights selected in any specific situation represent the buyer’s judgment about the relative importance of the respective factors.

After the performance factors have been selected, a specific procedure must be developed for measuring actual vendor performance on each individual factor. Supplier performance on each factor must be expressed in quantitative terms. To determine a supplier’s overall rating, each factor weight is multiplied by the supplier’s corresponding performance number; these products (for each factor) are then summed up to get the supplier’s final rating for the period in question.

The responsibility of vendors rating rest with a committee comprising of Chief/ Sr. Commercial Manager, Quality Control Manager, Accounts Manager and Chief Production Engineer. This committee shall meet every quarter to review each vendor’s performance. Assistance of computers shall be obtained for the vendor rating as far as possible. Vendors should be classified as class ‘A’, ‘B’ and ‘C’, based on their performance results. Future enquires shall not be sent to class ‘C’ vendors. A price preference of 5% to class ‘A’ and 2% to class ‘B’ vendors shall be accorded over the prices quoted by class ‘C’ vendors.

Critical Incidents Method

Evaluating vendors by this method requires that, a record of events and occurrences related to the buyer-vendor relationship is maintained in each vendor’s file. The data and comments recorded should be significant, not trivial. They ought to reflect positive and negative aspects of actual performance. This kind of documentation can be used as a basis for discussing ways and means of overcoming difficulties, improving performance, acknowledging the existence of good business relationships, determining the competence of a vendor, and if necessary, considering termination. Because the critical incidents method is relatively easy to implement, it is particularly useful for small organizations.

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