Evaluation of suppliers or vendors, Finance Basics

Evaluation of Suppliers or Vendors 

Vendor selection or evaluation is usually based on comparison along dimensions Inventory management that are thought to be important.

It is also possible to adopt a strategy of lowest cost and ignore other important criteria. Indeed one Apollo astronaut commented that his safety was dependent on the expertise of the sum of least cost suppliers, see the table below. 

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The method illustrates a simple method of making an evaluation and comparison of vendors. The assessment must be meaningful and requires a definition of each rating category. In order to collect relevant information, a definition of what 'excellent' actually means as well as the allocation of staff time is needed. Often visits to the premises of a vendor are required. Competitive bidding may not be the basis of winning an order. It may be that non-financial performance may determine the most suitable supplier. For instance, service or confidence in delivery may be more significant than lowest cost. The relative weighting scales can reflect which variables are most important.

Posted Date: 3/14/2013 5:57:02 AM | Location : United States

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