Supply Chain Management Supplier Positioning WWA purchases a variety of products
ID: 329278 • Letter: S
Question
Supply Chain Management
Supplier Positioning
WWA purchases a variety of products and services to manufacture its product. The table below provides insight into these purchases on an annual basis:
Category
$ per year spend
$ per item
Comments
Sheet metal
50k
50
Commodity item with multiple suppliers domestic and foreign. Due to the bulk of this material the company needs sources willing to work on a consignment basis
Final machining services
125k
100
Special equipment is required to perform these services. Additionally, the work is highly complex
Parts machined to WWA drawings
110
105
Small quantities make the parts expensive but there are a lot of local and international suppliers capable of manufacturing the parts.
Painting services
20k
15
Painting providers must be qualified by the customer
Consumables (welding rod, hardware, etc)
5k
5
Must meet industry requirements but there are a lot of suppliers.
Linear Averaging
The supply chain team has identified 4 suppliers in Low Cost Regions and evaluated them on Quality, Price, OTD, and transportation costs. The price evaluation uses an inverted scale, the lower the score the higher the price. Use Excel perform linear averaging and select the best supplier. See for the details of each supplier and their evaluation.
Sources of Supply Ratings
Selection Criteria
Weights
Shanghai
Hong Kong
Singapore
Queretaro
Quality
0.40
50
80
90
70
Price
0.35
20
50
70
60
OTD
0.20
90
60
70
90
Transportation Costs
0.05
20
50
80
60
Your procurement team is evaluating suppliers in LCR's (low cost regions).
Use Linear Averaging to determine the best supplier (the one with the highest score)
Category
$ per year spend
$ per item
Comments
Sheet metal
50k
50
Commodity item with multiple suppliers domestic and foreign. Due to the bulk of this material the company needs sources willing to work on a consignment basis
Final machining services
125k
100
Special equipment is required to perform these services. Additionally, the work is highly complex
Parts machined to WWA drawings
110
105
Small quantities make the parts expensive but there are a lot of local and international suppliers capable of manufacturing the parts.
Painting services
20k
15
Painting providers must be qualified by the customer
Consumables (welding rod, hardware, etc)
5k
5
Must meet industry requirements but there are a lot of suppliers.
Explanation / Answer
The linear Averaging method is one of the most common techniques used to select the best supplier.In this technique simply weights are provided to your selection criteria according to requirement.Here in this question weights are provided among Quality, Price, OTD, and transportation costs. The addition of these weights should be 1.
Here the addition of weights = (0.4+0.35+0.25+0.5) = 1
Next suppliers are given a rating from past experiences in those criteria.To calculate the score of a particular supplier we need t multiply each criterion and the score of a supplier in that criterion and the take addition of all the values to get the final score of the supplier.The excel sheet below shows this method to find the score of each supplier.
Formula in Excel
According to the results, we got the Singapore supplier has the highest rating of 78.5
So, the company should think of selecting that supplier.
Any doubt, please comment
Selection Criteria Weights Shanghai Hong Kong Singapore Queretaro Quality 0.4 50 80 90 70 Price 0.35 20 50 70 60 OTD 0.2 90 60 70 90 Transportation Costs 0.05 20 50 80 60 Score 46 64 78.5 70Related Questions
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