Tag: supplier

Using a Grid Analysis for Supplier Selection

An article was published in MasterControl’s November newsletter that simplifies the process of supplier selection.  A grid analysis is great for almost any decision-making situation where you want to objectively compare multiple options.  It also complements many other decision-making tools as well.

Per the article, factors that should be considered in the grid analysis for supplier selection may include:

Cost – Initial quotations and negotiations are not always representative of future costs.    However, this is certainly an important competitive advantage if that’s the desired positioning.  Contractual commitments should be discussed to avoid incremental increases.

Quality/Standards – Depending on the industry, specific supplier audits may be required.  If the organization requires ISO or other certifications, audit reports are a useful snapshot of the supplier’s strengths and weaknesses in specific areas.  This should incorporate management as well.

Location – The geographic component of supplier selection not only affects cost but it can also be required for certain products.

Shipment Expectations – The quotation and audit reports should include enough information to reasonably determine how well the supplier complements your existing demand schedules.

Expansion Capabilities – Long-term strategy will require that any supplier partnership considered important during the expansion plans of the organization should not be overlooked.

Grid analysis can be done in two ways, with or without weights.  If the assumption is that each factor decided on is equal in importance, go through each supplier and provide a rating for each factor based on all information available.  Do this for each of the three and total each row.  Scale each choice from 0 (poor) to 5 or 10 (great), and you don’t have to use different ratings for each one.  Assign each factor and supplier the rating it deserves based on all of the available information. 

For most situations, we know that all factors are not equal in importance.  That being true, a grid analysis can adapt to placing weights of importance on each factor.  To do this, multiply out the factors for more accurate results.  Weights may include something that is not important at all, which may have no value assigned, or something that is very important that may be assigned a weight of 5 or 10.   If a factor is determined to be twice as important than others, assign it a weight of 2.

Grid analysis can also incorporate team decision-making and offers useful comparative perspective as well.  If everyone on a team completes the grid analysis process individually, take the final score of each supplier from each team member and add them together.  Divide that number by the number of team members.  Do this for each supplier.

View the full article, including example data sets here.

Supplier partnerships are key

Many organizations approach us and are currently in volatile partnerships with suppliers over missed deadlines or unacceptable quality.  Communication has broken down, and both parties are unclear of how to proceed and ensure customer value.

The key to accomplishing objectives and mutually realizing benefits from continuous improvement initiatives is through cooperation and understanding from all party’s perspectives.

Supplier partnerships work best when the following is incorporated:

Transparency – It is important that information is shared with all parties in order to expedite resolutions and brainstorm long-term solutions.

Dependable Payment Terms & Service Delivery – Payments should be made in a timely manner, and services rendered should reflect accordingly.

Third-Party Evaluation – It is often less intrusive and move objective to have a third-party evaluate a system or process and make necessary recommendations.  Continuous improvement can be monitored and ensured by an unbiased source.

Understanding Perspectives – All parties have unique objectives to meet as a result of the partnership.  Understanding these objectives and incorporating mutually beneficial decisions unifies and strengthens the  relationship.  Focusing on long-term growth and objectives, in addition to aligning these objectives to meet both organization’s objectives, creates an environment for growth and continued success.

Successful supplier partnerships exist with open communication and ongoing evaluations.  Successful partnerships create customer value, greater efficiency, reduced costs, and more.

Preparing for an audit

checkmark_blueA previous Quality Q & A newsletter article featured tips for audit preparation.   In the reprinted content below, Pro QC’s Supplier Development Manager discusses how each party can expedite the process.

 

Preparation for a factory audit can be broken down by responsibilities of the client, supplier (factory) and third party (Pro QC). Communication and documentation are key actions that increase the likelihood objectives are met.

The Client:  

  • Inform the supplier to let them know an audit will be scheduled and provide additional contact details as available. Consider the length of time requested by the supplier, in addition to any initial hesitations noted.
  • Evaluate the expectations of the audit and relevant necessary components that should be incorporated into an on-site checklist or other evaluation tool.
  • It is not considered appropriate to surprise a supplier with a visit to perform an audit.

The Supplier:

  • Inform related internal people about the scope, agenda and contents of the upcoming audit.
  • Complete and submit the Supplier Profile and Booking form that will be supplied to you by the Pro QC Project Coordinator.

Pro QC International (3PQ):  

  • We work with the client to understand their expectations and the product and specific standard(s) involved.
  • We select a suitable audit checklist or develop a customized one if necessary.
  • We select the auditor best suited to the requirements noted and provide him/her with necessary training and recommendations to follow.
  • We provide an audit notification letter along with an agenda of the audit, the booking form fro scheduling and the Supplier Profile form to the supplier to inform them of the audit activities so that they can inform and prepare their internal attendees.

Selecting suppliers using a grid analysis

Let’s say you need to find a manufacturer for a new product.  It’s easy to look at the cost and weigh heavily in that direction.  However, this often results in regrets later when shipment delays and other quality issues occur.

A useful quality tool for making such decisions is the Grid Analysis.  It allows you to effectively compare various options using factors that can be weighted to adjust for relevance.

Example: A 3rd party quality provider has provided systems audits relating to three options you are considering for manufacturing in China.  You’ve determined the most critical decision factors include:

  • Quality
  • Timeliness
  • Communications
  • Management
  • Cost

Who do you pick?:

All things equal…

GridAnalysis_NoWeights

Using weights…

GridAnalysis_Weights

It’s not always the lowest cost provider that proves to be the best choice!

Grid Analysis is the simplest form of Multiple Criteria Decision Analysis (MCDA), also known as Multiple Criteria Decision Aid or Multiple Criteria Decision Management (MCDM). Grid Analysis helps you to decide between several options, where you need to take many different factors into account.

To use the tool, lay out your options as rows on a table. Set up the columns to show the factors you need to consider. Score each choice for each factor using numbers from 0 (poor) to 5 (very good), and then allocate weights to show the importance of each of these factors.

Multiply each score by the weight of the factor, to show its contribution to the overall selection. Finally add up the total scores for each option. The highest scoring option will be the best option.  (www.mindtools.com)

How do you select the right suppliers?

Selecting suppliers is undoubtedly one of the most challenging tasks organizations contend with.  Between finding, evaluating and selecting suppliers that will meet existing needs with room to grow doesn’t have to be an arduous process.  While requirements do vary greatly depending on industry, company size, demand, etc., the process of supplier selection can be simplified using a general road map that reduces much of the risks and cost.

So, how do you select the right suppliers?

Evaluate your needs– Where supplier selection and most other things are concerned, planning is key.  Organizations need to carefully evaluate the internal and external factors that affect the kind of supplier they need.  Not only is it a good idea for organizational strategy purposes, but potential suppliers will likely find this information useful for quoting purposes as well.  I’ve found that feedback relating to poor choices in supplier selection is mainly attributed to poor communication.  In other words, failure to meet expectations usually happens when expectations are not well defined and/or communicated to all.

Find potential suppliers using a concentrated checklist– Once you’ve figured out what you need, imagine the ideal supplier.  In fact, brainstorm all of the characteristics that this perfect supplier would have.  Then, take that list of wants and needs and concentrate it down to a handful of attributes.  If you find it difficult to narrow down, see if any of the items can be characterized into a broader category and then assign weighted values.  It’s a good idea to incorporate values regardless so analyzing the options becomes easier.  Scouting often starts with online searches using marketplaces such as Alibaba.com.  Follow-up interviews using the checklist as a guideline keeps everything in perspective.

Analyze the options– Go back and review the serious prospects.  Pick a handful that outshines the rest based on the checklists.  A grid analysis is an excellent tool for organizing information like this.  It forces you to look at the bigger picture, yet it retains the ability to see each option separate or broken down by characteristic.  At this point, a proactive approach we suggest is conducting supplier audits for the two or three choices that stand out as the best potential fit.  “An on-site audit of the facility includes an evaluation of general operations, quality systems, qualifications and capabilities of the supplier as a viable source.”   During an audit, checklist information can be verified on-site through various interviews and documentation review.

Make a decision—  When selecting suppliers, make sure you maintain perspective regarding your requirements and weights of various attributes as noted during the information gathering process.  It’s very easy to look at the bottom line and compromise on salient issues.  Trust your information.  And, be sure to follow-up with any potential prospects you didn’t select.

Develop a relationship– Developing a relationship with suppliers is critical to long-term success.  It’s difficult to find a company that disagrees with this, but much easier to find one that truly dedicates the time and resources towards accomplishing it. Documented expectations and open communication reduce the headaches associated with poor quality, missed shipments or ultimately the process of switching suppliers.  Regular follow-up is an invaluable and cost-effective way to identify potential issues early on.

Monitor performance– Ongoing evaluation of suppliers is necessary for continuous improvement.  Gathering and analyzing performance data (inspection defect information, return rates, etc.) on a regular basis, in addition to intermittent on-site audits, identifies areas of improvement and insures expectations are being met. Where necessary, corrective action can be incorporated to resolve issues prior to customer impact and possibly even before they start.

Note that as a 3rd party quality assurance provider with resources in over 30 countries, Pro QC assists clients with Vendor Identification services that includes checklist development and scouting. In addition, Pro QC’s team of quality professionals offer expertise and local knowledge you can put to use on-site, providing unbiased assessments while reducing the time and cost associated with travel and evaluation. Product InspectionsCorrective Action and Supplier Development services also complement the supplier selection process as noted in this article.