CASE STUDY

Case study

Case study

(a)WWC has just been approached by a large Japanese liquor distributor, which is offering its services as an exclusive distributor of Penderyn within Japan. This company is a long-established Tokyo-based drinks distributor, handling a range of imported wines and white spirits (e.g. gin, vodka).

Identify and discuss the process and the selection criteria by which WWC might consider the appointment of this distributor for the Japanese market.

Experts agree that no best way exists to evaluate and select suppliers, and thus organizations use a variety of approaches. The overall objective of the supplier evaluation process is to reduce risk and maximize overall value to the purchaser. An organization must select suppliers it can do business with over an extended period of time.

Supplier evaluations often follow a rigorous, structured approach through the use of a survey. An effective supplier survey should have certain characteristics such as comprehensiveness, objectiveness, reliability, flexibility and finally, has to be mathematically straightforward. To ensure that a supplier survey has these characteristics is recommended a step-by-step process when creating this tool.

Figure 2.1 presents the steps to follow when developing such a system (Monczka, Trent, Handfield, 2002). This general framework is explained in detail next.

The framework includes seven steps:

Step1. Identify key supplier evaluation categories

One of the first steps when developing a supplier survey is for the purchaser to decide which performance categories to include. The primary criteria are cost/price, quality and delivery, which are generally the most obvious and most critical areas that affect the buyer. For many items, these three performance areas would be enough, however for critical items needing an in-depth analysis of the supplier's capabilities, a more detailed supplier evaluation study is required.

Step 2. Weight each evaluation category

The performance categories usually receive a weight that reflects the relative importance of the category. The total of each weight must equal 1.0. An important characteristic of an effective evaluation is flexibility. One way that management achieves this flexibility is by assigning different weights or adding or deleting performance categories as required.

Step 3. Identify and weight subcategories

This process requires identifying any performance subcategories, if they exist, within each broader performance category. The sum of the subcategory weight must equal the total weight of the performance category.

Step 4. Define scoring system for categories and subcategories

A clearly defined scoring system takes criteria that may be highly subjective and develops a quantitative scale for measurement. Scoring metrics are effective if different individuals interpret and score the same performance categories under review. For illustrative purposes, an example is a 10-point scale where 1-2= poor, 3-4= weak, 5-6= marginal, 7-8= qualified, 9-10= outstanding.

Step 5. Evaluate supplier directly

A purchaser can compare objectively the scores of different suppliers competing for the same purchase contract or select one supplier over another based on the evaluation score. It is also possible, based on the evaluation that a supplier does not qualify at this time for further purchase consideration. Purchasers should have minimum acceptable performance requirements that suppliers must satisfy before they can ...