Supplier Evaluation and Business Processes (PLG1): Suppliers’ Strive and Business Processes
Hua, Li
Embry Riddle Aeronautical University Student
LGMT 536 Purchasing and Supply Chain Management
Maggie Rivers
October 31, 2021
Growth of purchasing expenditures use five different categories within a supplier categorization stairwell (Monczka et al., 2020). The terms for the categories are: disqualified, approved, preferred, certified, and partnered. The last three referenced categories reward only the best suppliers (Monczka et al., 2020). Therefore, suppliers are striving to become the best in their class by growing their businesses while maximizing their revenue. From the first stage, the buying company utilizes their own supplier evaluation form to narrow down the supplier selection pool. This also categorizes suppliers by identifying world class suppliers who can meet the buyer requirements.
Preferred, certified, and partnered suppliers gain this status over time which allows the supplier to bypass many audit requirements. To reach this status these suppliers had to pass three primary evaluation measurables including: cost, delivery and quality (Monczka et al., 2020). Once those criteria are assessed, these suppliers also get credit for satisfying the buying company’s sustainability and service flexibility requirements. Additionally, exceeding the buyer’s needs and quality specifications can propel a buyer to these preferred partner statuses. On certain occasions, a supplier might provide critical and high value items. If it’s the only source, then partnered suppliers would become sole suppliers, reducing buyer leverage as the supplier gains increased asking power in the situation (Monczka et al., 2020).
The best suppliers possess several traits: holding patents on products, intellectual property rights, owning expensive tooling, having the most efficient production process, and making products significantly less expensive than any alternative (Monczka et al., 2020).
For effective supplier selection, developing a quantitative supplier evaluation survey is critical. From the seven-step evaluation process, one requirement is that the survey process should be as objective as possible. This requires the use of a scoring system that defines the meaning of each value on a measurement scale (Monczka et al., 2020). A well-defined scoring system takes criteria that may be highly subjective and develops a quantitative scale for measurement. Effective metrics allow individuals of different skill levels to interpret and arrive at a similar score during evaluations (Monczka et al., 2020).
In contrast, a scoring system that is too broad, ambiguous, or poorly defined increases the probability of those same individuals arriving at widely different assessments or conclusions (Monczka et al., 2020).
There are several key business processes discussed in the Magal text, Chapter 1. Whatever the functional area, the processes are cross-functional, and no single group or function is solely responsible for proper execution. Rather, it is a shared responsibility among many functional areas (Magal et al., 2020).
This can be demonstrated by showing the dependent links between procurement (buy) and fulfillment (sell) processes. The procurement process (buy) refers to all of the activities involved in buying or acquiring the materials used by an organization. An example is, acquiring the raw materials needed to make products, and the fulfillment processes consisting of all the steps involved in packaging, addressing, charging and then delivering the refined raw material (Magal et al., 2020).
Buy and sell processes are interdependent on each other. When the sales department receives an order from the customer, the sales department’s order triggers the purchasing department to buy the component parts for manufacturing or delivery of the product to the customer. Fulfillment processes also rely on the successful completion of other subprocesses.
For proper execution of the fulfillment process, the sales and purchasing department need effective communication and collaboration. Without this interaction, the process cannot be completed efficiently and effectively (Magal et al., 2020). Therefore, the company must rely on each functional group to execute its individual steps in the process, in coordinated way, to achieve organization goals (Magal et al., 2020).
References
Magal, S., Word, J. Business Process Integration- S/4 HANA. Epistemy Press LLC (2020). https://lms.epistemypress.com/course/view.php?id=5.
Monczka, R., Hanfield, L., Giunipero, L. Patterson, J., (2020). Purchasing and Supply Chain Management, 7th Edition. Cengage
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