Supplier Selection:

Suppliers are selected based on their performance in terms of cost, quality and delivery reliability. In addition, supplier criteria include factors such as management compatibility, goal congruence, and strategic direction of the supplier firm. During the inquiry stage itself, many of the vendors might have been dropped from the original list as unsatisfactory. The remaining vendors may be called for direct negotiations to discuss various terms and conditions like payment terms, discounts, supply procedures, quality control procedures, etc. as a result of this a final list of approved vendors is drawn up. In this stage the performance of the supplier is evaluated mainly on basis of quality and promptness in delivery. A history card is maintained for each vendor. The card contains information like dates of supply of materials by vendor, inspection, procedure adopted acceptance or otherwise of the lost supplied. Frequent rejections may upset the production schedule in the buyer’s company and result in heavy losses, hence such vendors might be dropped from the list. Similarly the late deliveries may cause stoppages in production otherwise large inventories may have to be carried in stock. Both the situations are not desirable and hence such vendors are also reviewed for continuance as suppliers.