Elements that are used to choose and retain suppliers should be weighed and rated by their percentage of importance to the organization when rating supplier performance. Usual fundamentals in choosing suppliers are cost, delivery, flexibility, capabilities, quality, and service. These can be further broken down.
For example; Cost can be broken down into actual price and competitive pricing. Delivery can be broken down into physical distance, reliability, speed, and expediting. Flexibility might entail such things as modifications, changes in volume or mixture. Capabilities would cover such things as product specialty, technology, and whether the supplier will share their technologies with the customer. Quality denotes conformance to specifications, durability of the product supplied and reliability that the product is able to be produced with few, if any, down-times. Service may involve such things as complaint handling, information sharing, and other communication based elements that would make the customer more at ease using the supplier.
Each of these elements should be rated as a matter of importance to the customer who is. using the supplier and given a percentile weight in the over-all System. Every supplier, or at least similar supplier should be rated on the same scale. There may be a few exceptions or differences in weighting of a supplier, but once established, each supplier should be rated on a like scale.
Non-conforming product should be taken into account and used when reviewing each supplier score. Scores should be provided by a team that consists of (at least) Quality, Purchasing, Engineering, Management, and a representative from any department that is affected by the supplier. The ratings are tallies as “fuzzy” data and converted statistically into a numerical score that is repeatable, understandable, and realistic.
Scores are communicated to the suppliers with a brief analysis so that they may more clearly understand customer needs and whether they are meeting them. Supplier Performance Measurement (SPM) is used to both convert the fuzzy data to concrete data: “defuzzification” (Maheswari & Kumari, 2012), and to rate suppliers on an approved supplier list.
A. U. Maheswari & P. Kumari, (2012), A fuzzy Mathematical Model for Multi Criteria Group Decision Making –An Application in Supply Chain Management. International Journal of Computer Applications 0975-8887, Volume 54, No.7.