Supplier Evaluation Processes - Essay Example

Supplier evaluation processes Introduction Lately, measurement of performance in operations management has some level of attention. Suggestions attribute this attention to, partly, changes witnessed in business environments and wholly to the fact that, in the end, these changes triggered the revolution of performance measurement particularly fuelled by the ineffectiveness of the previous financial oriented performance measurements that were one-dimensional (Gordon, 2008:155). One such observable change in this business environment is the increase in scope of managing whereby as of now, companies seek to control their inter-organizational operations. In order to improve the management of wider supply chains, academic writers have suggested a number of new and modified managerial practices and tools, which a multitude of practitioners are implementing (Havaldar, 2010:309). Further suggestions by numerous authors point out that previous performance measurements which solely focused on internal factors now need broad and drastic changes otherwise they might limit the possibility of optimizing dyadic relations or rather the supply chain of every organization. This essay will seek to illuminate ways in which supplier evaluation practices link with supplier performance improvements. It will also discuss the practicality of the findings obtained from Hald & Ellegaard (2011) research. Q1. Discussion of the research’s practicality Ideally, investigating how performance information travels between the evaluating supplier and the evaluated buyer and how the shaping as well as reshaping of information in the evaluation process is imperative (Hald and Ellegaard, 2011:888). Relying on a longitudinal and multiple case researches as the methodology to obtain findings, this essay will bring out the practical implications, originality, and value of evaluation of performance measurement in a supply chain ( Golmohammadi, 2007:121). Several studies brought forward that studies based on the development of systems aimed at addressing performance measurement outside legal company boundaries are three in classification. They are supply chain evaluation, buyer- supplier relationship evaluation, and supplier evaluation. Technical rationale particularly applied by econometrics tends to dominate in cases where improved systems and measures align with the strategies set by an organization (Monczka, 2010:458). Additionally, this dominance goes ahead to appear in other areas where the set systems align strategically with optimum performance measurement as well as in areas where it results in improved performance especially in the activities measured. Elements involved in shaping and reshaping of supplier performance Elements or rather factors, in this aspect, indicate the underlying causes that shape and reshape information. They can appear in the form of systems limitations, cognitive barriers, preferences, and/or organizational dimensions among others. After carrying out a research based on two companies (A and B), this paper found out that factors that either transform or hinder the performance of measurement information are practical in many facets. Analysis shows that these factors shape and reshape whatever supplier performance has (Gordon, 2008:157). Categorically, the analysis identified four elements from the research that shaped the supplier performance information in its design phase. The first two factors (one and two) closely interlinked with design and organizational dimensions while the other two (three and four) came into being because of systems circumstances and limitations. Additionally, the paper established that the result of the design phase and the “evaluation group structure” linked closely to actor preferences ( Golmohammadi, 2007:123). Therefore, “performance complexity” ended up being the shaping factor because of the cognitive barriers associated with purchasers and suppliers. In industries, if performance evaluation is complex, it becomes hard for the evaluating buyers and suppliers to help shape and reshape their performance (Hald and Ellegaard, 2011:889). The researchers set out evaluation group structures whereby companies A and B set up groups and charged them with the responsibility of designing and monitoring supplier performance. In these groups, representatives defined all the elements that were to be included or omitted from the models of measuring performance. Generally, the results were a reflection of interests of the departments that participated in the evaluation clusters (Havaldar, 2010:312). In company A, the authority of making decisions remained solely in the hands of the category manager, a factor that dominated the evaluation scheme due to purchasing logic. With reference to performance complexity, company B’ suppliers and purchasers argued that, relationships like the one shared between company B and specifically its strategic suppliers was very complex compared to what the quantitative measures obtained from the Enterprise Resource Planning system could represent (Monczka, 2010:460). This highlights that the case was an issue of perceived misinterpretation of general identities. The Measurability of data showed that for company B, speed within the implementation phase was the priority and as such, it focused on the measures that were easily assessable in the Enterprise Resource Planning system ( Wisner, Tan, and Keong, 2008:301). Similarly, when industries puts into such practices like allowing structural groups to decide what to incorporate in the designing and monitoring of supplier performance, they tend to apply models that suit their research. This in turn gives the groups ability to try out practices that can provide the relevant results suitable for aiding the suppliers’ performance. Further, the ability to exercise free will while choosing what to use to measure the performance of suppliers enables industries to reduce cases of performance complexity hence obtains measurable data ( Golmohammadi, 2007:124). Practicality of factors that shape the implementation of systems of supplier evaluation The research identified four key factors that played a major role in the process of implementing the supplier evaluation systems. The study shows that, out of the thirteen factors identified, factors five, seven, and eight tightly linked with the systems circumstances and limitations ( Wisner, Tan, and Keong, 2008:302). Nevertheless, even though they related to technical matters, it was also very hard to separate these factors from preferences and actor cognition. For instance, factors five and eight were designed to fit in the process mainly because of buyers’ ideas that incorporated efficiency and simplicity in the making of decisions especially those involved in supplier evaluation processes (Trent, 2007:180). The sixth factor related directly to the preferences and cognitive barriers of the evaluated buyer actors. In simple terms, the rating or translation models on the performance of suppliers indicated that both companies A and B employed rating models, which translated less or more easily quantifiable the supplier performance to short list numbers. In this case, the evaluation seemed to be a sort of condensation whereby it happened to be an instance of tumbling complex dimensions into just one number (Azadegan, 2008:49). In company A, buyer logic commonly used to motivate suppliers showed that the evaluated buyer had ideas regarding how to motivate suppliers the best way. As a result, the evaluating buyer shaped supplier performance information by deliberately using almost unreachable and high targets (Hald and Ellegaard, 2011:901). The supplier evaluation systems recorded a bit of instability in company A. consequently, this instability made things difficult for suppliers to depend on the obtained data as a basis for enhancements which in turn led them to question the whole supplier evaluation system (Gordon, 2008:159). Sensibly, in this competitive global business environment, industries and other players in the market need to identify suppliers with potential to deliver efficiently despite such economic turbulences. The use of translation or rating models gives industries the power and insights to survive the intensive competition by providing means of identifying the potential suppliers specifically with substantial and flexible supply chains (Trent, 2007:182). Apart from that, presence of elements that lead to instability gives industries the zeal to have back plans especially related to finding new suppliers in case the existing ones fail to meet the industry’s expectations (Havaldar, 2010:315). Although rare, some suppliers do not meet the supplying screening qualifications. According to supply chain principles, need for supplier qualification screening is pragmatic. However, this does not highlight that the market has no suppliers with the required credentials. Nonetheless, the research highlighted that buyer logic does not only generate new ideas and motivates purchases, but also gives insightful strategies for measuring the performance of suppliers (Sower, 2010:241). This provides industries with a basis for ensuring selective and improved service to the evaluating purchasers. Factors that shape the use of supplier evaluation systems In this final part of supplier evaluation phases, the research identified other shaping factors. Overly, issues related to preferences and actor cognition play a crucial role in a supplier evaluation system. For one, individual buying evaluators such as purchasers have the power to reshape the supplier performance information via their own preferences and cognition ( Wisner, Tan, and Keong, 2008:305). These actor judgments and interference are possible mainly due to the presence of non-automatic transmittance of data evaluation by suppliers (Azadegan, 2008:51). With reference to lessons learnt in OMGT1021 Supply Chain Principles, suppliers lose motivation at times when buyers fail to compare the performance levels of suppliers with other similar suppliers and with their own levels of performance. Q2. Other factors to consider during design or use of supplier evaluation system Since coming up with a desirable supplier evaluation system can prove to a hard task for every industry, it is always important to factor out the best elements capable of providing usable supplier evaluation system. With that respect, it becomes substantial to avoid dire outcomes that might erupt from supplier non-performance by taking typically proactive steps (Trent, 2007:185). This measure enables an industry to verify the supplier’s evaluation system prior awarding him a contract. An effectively designed supplier evaluation system has no room for supplier non-performance mainly because its primary goal, according to econometrics, is to minimize the likelihood or possibility of late delivery, poor performance, and/or delivery of faulty goods (Monczka, 2010:462). Currently, industrial function of purchasing remains as part of the most critical activities that an industry must implement for it to ensure competence and long-term viability. In that vein, this paper identified five other factors that an industry should consider for the design and use of supplier evaluation system. Supply chain optimization To begin with, supply chain optimization is a congruent factor that a firm should consider during the design and use of its supplier evaluation system. Supply chain optimization brings about the aspect of “build to order” which is a true and capable factor suitable for drastically reducing the quantity of inventory held along the whole chain of supply (Trent, 2007:188). Moreover, supply chain optimization makes it easier for smooth flow of information hence reduces guesswork practices regarding the needs of the firm, thereby minimizing inventory carrying expenses, spoilage, overstocks, and obsolescence collectively (Azadegan, 2008:52). Truthfully, when designing supplier evaluation system, the tasked individuals should include supply chain optimization in order to enhance the functioning of the entire system as this factor helps purchasers foresee and particularly anticipate for any unexpected barriers along the supply chain. Supplier consolidation Second, companies should consider supplier consolidation when designing or using a supplier evaluation system. Research findings point out that in order for an industry to gain adequate volume purchasing power and simultaneously reduce both its coordination and administrative costs along the supply chain, it must strive to consolidate towards fewer suppliers. Specifically, companies that deal solely in unique competencies are increasingly seeking suppliers to undertake manufacturing responsibilities (Hald and Ellegaard, 2011:904). Formerly, such services and tasks lied in the hands of in-house suppliers (Golmohammadi, 2007:125). This is pressing a heavy toll on costs and time hence overstretching the supply chain systems which in the end makes the supplier evaluation system ineffective. Following this spectrum, it is vital to consider supplier consolidation when designing a supplier evaluation system in order to avoid any errors that might arise from hefty undertakings by suppliers. Quality Quality is yet another factor that should be considered in design and use of supplier evaluation system. Quality in this case refers to the general conformance of aspects of supplier evaluation system to be in line with the requirements of the system. A quality supplier evaluation system is one that has a multi-faceted functioning in which the firm may perceive through five principle ideals (Azadegan, 2008:55). Firstly, quality should be considered during designing of supplier evaluation system because it facilitates conformance and fitness since transcendent quality is a condition or an idea of excellence. Furthermore, a supplier evaluation system based on quality links directly to products attributes (Hald and Ellegaard, 2011:906). According to most practitioners and academicians, user based quality is a reflection of fitness to use and value based quality indicates the degree of acceptance and excellence. Quality is therefore a major component that every supplier evaluation system designing should consider (Trent, 2007:189). Delivery In addition to quality, delivery is another factor that should be considered during supplier evaluation designing and usage. It is a special prerequisite for supplier evaluation system mainly because it conforms to quality specifications and provides a record of the activities that the system meets on time (Hald and Ellegaard, 2011:908). Since it has a platform for providing the details required to evaluate the effectiveness of a supplier system, it becomes essential to include it in designing and using of supplier evaluation system. A purchaser and a supplier are able to calculate the amount of time a particular delivery of a given product took (Dolcemascolo, 2006:116). Thus, it becomes clear and easier for a purchaser to evaluate whether this kind of supplier system is in conformity with the existing supply chain principles. Report service and conclusion Report service is also another crucial factor that should be considered in design or use of supplier evaluation system as customers are becoming more knowledgeable about the terms and requirements of purchasing. This is bringing forth the aspect of purchasers dictating their terms of delivery (Hald and Ellegaard, 2011:910). However, the presence of report service gives a supplier evaluation system to look back and analyze its functionalities and assess which activities needs to be stopped, improved, or which areas to explore. In conclusion, research based on supply chain principles and supplier evaluation system needs to be intensified in order to meet the ever-changing ways of operations in this field of operations. This matter points out that purchasers will definitely opt for flexible, fast responding, supplier chains equipped with a high level of technical expertise capable of solving problems instantly and that which draws satisfaction. Bibliography Azadegan, A., 2008. Supplier Innovativeness and Manufacturer Performance: An Organizational Learning Perspective. London: ProQuest. Pg 49-56. Dolcemascolo,D., 2006. Improving the Extended Value Stream: Lean for the Entire Supply Chain. Chennai: Productivity Press. Pg 116 Golmohammadi, D., 2007. A Decision Making Model for Evaluating Suppliers by Multi-layer Feed Forward Neural Networks. London: ProQuest. Pg 121-125. Gordon, S. R., 2008. Supplier Evaluation and Performance Excellence: A Guide to Meaningful Metrics and Successful Results. Fort Lauderdale, FL: J. Ross Publishing. Pg 155-159. Hald, K. S. and Ellegaard, C., 2011. Supplier evaluation processes: The shaping and reshaping of supplier performance. International Journal of Operations & Production Management Vol. 31 (8), pg 888-910. Havaldar, 2010. Business Marketing: Text & Cases, 3E. Uttar Pradesh: Tata McGraw-Hill Education. Pg 309-315. Monczka, R. M. et al, 2010. Purchasing and Supply Chain Management. New York: Cengage Learning EMEA. Pg 458-462. Sower, V. E., 2010. Essentials of Quality with Cases and Experiential Exercises. New Jersey: John Wiley & Sons. Pg 241. Trent, R. J., 2007. Strategic Supply Management: Creating the Next Source of Competitive Advantage. Fort Lauderdale, FL: J. Ross Publishing. Pg 180-189. Wisner, J. D., Tan, K. and Keong, L. G., 2008. Principles of Supply Chain Management: A Balanced Approach. New York: Cengage Learning EMEA. Pg 301-305. Read More