Supply Chain Management - the Importance of Vendor Evaluation Process - Research Paper Example

Running Head: Supply Chain Management Supply Chain Management [Writer’s Name] [Institutions’ Name] Table of Contents Page No. Chapter 4 4- Findings and Analysis 3 4.1. Introduction 3 4.2. Findings and Analysis on Primary Research 5 4.2.1. Outline of Interview Questions 5 4.3. Chapter Summary 25 Chapter 5 5- Conclusion 26 5.1. Review of Objectives 26 5.2. Concluding Statements 26 4 – Findings and Analysis 4.1. Introduction The survey questionnaire prepared had been sent to 120 freight forwarding companies and they were asked to complete it suitably. There were three kinds of companies taken into account: traditional family companies, SMEs and MNCs. 40 of each kind of the companies were considered. There are certain limitations of the survey that had been considered in this research. One of the limitations of it is that there might not be an appropriate number of responses received. This would, thus, not permit obtaining accurate findings. Another problem can be that the majority of the respondents who have completed the questionnaire are from a certain rank; for instance, most of the responses are from assistant managers only or from executives. Once more this does not lead to practicable results as in this case the responses are biased, and opinions of every kind of person have not been obtained. Another cause for bias in the research results can there being more responses from either male employees or the female ones. Once more, there would not be a consideration of the general view and thus the results would not be as accurate as desired. In the current research following the questionnaires being obtained from the companies, the researcher gathered and analysed the results. There was a need of studying every response separately and appropriately. Following this the results had to be categorised. This means that the data can be grouped together according to any similarities existing in the responses. For instance, data that has similarities can be grouped together; responses of a certain kind of employee can be put together like the results of all executives or of all assistant managers can be grouped in a single category, and so on. In the present research the responses of every question were put together and an analysis and comparison was done. After the grouping had been done the results were analysed properly so that absolute insight could be attained about the findings. The data was gone through and the important areas were noted. A trend was found from the results that could be used for understanding vendor evaluation, its importance and the way it is done. The research results have been given in the following paragraphs along with graphical figures to make the results easily understood. The results showed that vendor evaluation is almost universally considered to be an important part of the processes of a company. However, a similar majority was not found to be taking care of performing this process of vendor evaluation for their company. 4.2. Findings and Analysis on Primary Research 4.2.1. Outline of Interview Questions Question 1: Do you feel vendor evaluation is very important? Participants Responses Traditional Family Companies Vendor evaluation is not extremely important. It may result in a better outcome for the company but a small, traditional family company would probably not be affected much due to the presence or, for that fact, absence of vendor evaluation process. SMEs Vendor evaluation is an important process and a company should be taking it into consideration when deciding upon a vendor. MNCs Vendor evaluation is an extremely important process which cannot be avoided at any cost. Any kind of mistakes in this area could lead to drastic losses in terms of financial as well as reputation. Analysis: A huge majority of the respondents felt that vendor evaluation is indeed extremely important for a company. They certainly do recognize the importance of this process and realize how it can affect the running of a company. They must have had experiences of poor vendor evaluation or must have learnt from others’ experiences which led to them making such a decision. The respondents appreciate that there should be proper vendor evaluation done else the company may be in for great loss – in terms of money as well as reputation. However, there were differences in views of the different kinds of companies. For example, the employees of family businesses having a very small staff did not think they are required to perform vendor evaluation. On the other hand the MNCs felt compelled to do so. This can be attributed to the size of the company. The small family businesses and the multinational companies have a vast difference and their requirements are also different. Question 2: Do you spend much for the purpose of vendor evaluation? Participants Responses Traditional Family Companies There is no need of spending on vendor evaluation since this process is not exactly important in small companies such as the family businesses. SMEs Spending is done for vendor evaluation but we do not go out of the way for it. Only the necessary bit is done. MNCs Enough resources are spent for this purpose. Being multinational companies we are required to see into each and every process of the company in order to avoid any kind of problems which may bring trouble to the profits or the reputation of the company. A certain amount is set aside for spending on vendor evaluation. Analysis: This question was also not answered unanimously. The traditional family companies did not seem to be spending on vendor evaluation since they did not think this process to be an important one. Thus, they would have wasted their capital spending on something unimportant for the company and with which they are not getting any special benefits. The SMEs and the MNCs, however, did spend on vendor evaluation. The former ones did what was necessary and the MNCs spent a lot in order to avoid any kind of problems. They paid quite a lot of attention to vendor evaluation. Question 3: Do you give a lot of time for vendor evaluation? Participants Responses Traditional Family Companies Again, since the process is not considered so important it is not given attention. SMEs Vendor evaluation is given attention but it is made sure that the other processes are not ignored. The first priority is not of vendor evaluation although it is also important. MNCs Vendor evaluation is given the due attention and it is made sure that no parts of it are ignored in any way. Analysis: From the responses of the previous questions it was found that the process of vendor evaluation is not important for the family companies. The SMEs considered it important while the MNCs gave a high priority to it. The responses to the current questions are in accordance with this view. Since the family companies did not consider the process to be important they did not give time to it. The SMEs paid some attention to the process while the MNCs were very attentive to the process, since they considered it extremely important. Question 4: Will you forego an excellent vendor if the price he charges is too high? Participants Responses Traditional Family Companies Definitely, since vendor quality is not given much importance. Profits cannot be wasted on vendor evaluation. SMEs Yes. Although vendor evaluation is considered important it is not such that a very high price is given out for it. Surely another good enough vendor can be looked for. MNCs Depends. If the vendor is really that good and there is no other choice of getting such a good vendor then we would be willing to pay a high price. This is because of the importance of the procedure. Analysis: Again, since the family companies did not feel vendor evaluation to be important for their company they would definitely not pay a high price for it. The situation of the SMEs the case is the same; although they feel the process is important they would not be willing to pay a high price for it. On the other hand, the MNCs would consider the deal and would pay a high price in case another good vendor is not available. Question 5: Is price more important than the delivery performance and quality? Participants Responses Traditional Family Companies If the company is really dedicated toward its customers the price does not have an upper hand over performance and quality. In the case of a family company quality is not considered over price. The price happens to be the important factor when determining vendors. SMEs Price is certainly important and negotiations have to be done when hiring vendor services. The price cannot be ignored. In case the price is too high we do have to let go of the vendor since we cannot always afford to pay too much for vendors. MNCs Price has to be considered when determining the vendors. However, quality and performance has to be given a lot of importance since that is what would attract clients. Thus, we do take care of quality and performance even if that means paying a higher price, though price is also considered. Analysis: All three kinds of companies feel price to be important and that it should be considered and taken care of. The traditional family companies would definitely prefer a lower price over performance and quality. This is the case with the SMEs too but they attach a greater importance to quality than do the traditional family companies. The MNCs consider performance to be extremely important and take care to provide and employ quality work. They do check the prices as well but to them quality is more important than money. Question 6: Do you feel that the price being charged is really important and should be considered? Participants Responses Traditional Family Companies Price is definitely an important part of the dealing. It has to be considered when making a deal since money plays an important role in determining the profits of the company and thus the income of the workers and owner. SMEs Certainly price has an importance. It has to be considered if the company does not wish to go in losses. However, there is also a requirement of checking the quality. The price should be such that it is worth the quality being provided along with being the least possible. MNCs Price should be considered but quality is extremely important too. Good quality cannot be foregone because the price is too high. However, the final price should be within the budget. Analysis: Price is considered very important by each of the three kinds of companies although in varying degrees. The family companies feel that high price is a waste of money even if they are being offered with a very high quality work. The SMEs value quality more but they would forego quality if the price is too high. The MNCs, although consider price to be important, have a slightly different view, and they would check out the vendor to make sure that the service is worth the high price. Question 7: Do you check beforehand whether your freight forwarder is licensed or approved by the appropriate entities? Participants Responses Traditional Family Companies No. There is no requirement of this. SMEs Only when there seems to be something up that we check out on the vendor. Otherwise there is no such need for having a licensed vendor for the services. MNCs We have to have licensed vendors to avoid any kinds of troubles later on as they could turn costly and even be a problem for the reputation of the company. Analysis: Checking out on vendors was not a requirement for the traditional family companies and the SMEs. However, the MNCs carried out this process in order to be sure about the vendor and because they feel that there company’s reputation would be at stake in case there is something wrong with the vendor, or if problems come up. Question 8: Is there a difference between choosing a freight forwarder who is financially stable and one who is not? Participants Responses Traditional Family Companies Not really. SMEs There is not much difference. It does not matter whether the freight forwarder has his own finances since his only work is to perform the services that are asked and that he is being paid for. MNCs This is a good idea since it makes sure that you would be getting a good service. A financially stable freight forwarder would be having good resources and would be able to deliver better services than the ones who are financially stable. Analysis: Just the MNCs thought of choosing financially stable freight forwarders since they thought that these forwarders would be able to deliver better services since they would be having the resources to do so. The traditional family companies and the SMEs did not consider his important. Question 9: Do you check whether your intended freight forwarder can handle whatever product you wish to get shipped? Participants Responses Traditional Family Companies Sometimes. SMEs This should be checked since the products have to be safely delivered. But this is not a priority if the deal is a good one. MNCs Certainly. This is requirement if the product is to be transferred properly and within time. If the shipper cannot handle the product he would not do a good job and we would not be able to provide the goods to the buyer within the provided time. Analysis: None of the companies thought this to be a waste of time. The family companies only checked this rarely. The SMEs were ready to forego this if they happened to get a good deal. On the other hand, the MNCs were definitely with checking out if their freight forwarders had the experience of handling their kind of products. They said this would expedite the process and would also result in a better service provided. Question 10: Do you check whether the freight forwarder has a good network of agents overseas, particularly in your target market? Participants Responses Traditional Family Companies There is no requirement of this. SMEs Not exactly. Since this would not really affect the work. MNCs It would help if this aspect of the forwarders was checked. This is for making sure that the forwarders have agents and can get work done. However, it is not really necessary. Analysis: This aspect was not seen to be very important by each kind of company. The traditional family companies felt that this is completely unnecessary. The SMEs also felt this would not bring about any kind of advantages. The MNCs felt slight importance to this process. They felt that this would bring benefits as work would be done quickly by means of agents. Question 11: Do you check your freight forwarders’ references? Participants Responses Traditional Family Companies Hardly ever. SMEs Only when there seems to be something up that we check out on the vendor. Otherwise there is no such need for getting references. MNCs References are important since they are a determination of how well the vendors perform and what the other companies think about them. If the references have given a good account of the vendor, it is known that they would perform well and can be employed for their services. This would also save money later on. Analysis: This requirement was found to be dominantly present in the MNCs. These kind of companies felt that there have to be references if they are to determine whether a vendor can be employed for their work or not. The other companies, the traditional family companies and the SMEs, did not find this important. Question 12: Do you choose the freight forwarder who knows your products? Participants Responses Traditional Family Companies No requirement of this. SMEs Since the vendors are just supposed to ship the products they are not required to know about the products. MNCs It is good to have forwarders who have a knowhow about your products. This would make sure that they can handle them properly and there are no problems or defects in the products later on. Analysis: The traditional family companies and the SMEs do not find this to be important. However, the MNCs feel that the forwarders who know your products can deliver a better service. Question 13: Does this make a difference in the outcomes? Participants Responses Traditional Family Companies No, since it is not important. SMEs Not really as all the forwarders have to do is ship the products, and the product can be anything. MNCs This would make a difference in the quality of the service having been obtained from the forwarders. Analysis: The traditional family companies and the SMEs do not find any difference in the results in case the forwarder knows about their products or does not. The MNCs, however, feel that the know-how would help in a better handling of the products and a deliverance of a better service, and ultimately an improved outcome. Question 14: Should the freight forwarders be checked for errors and omissions insurance? Participants Responses Traditional Family Companies This has to be checked in case we are not able to cover the losses due to any of the errors committed. However, it can be foregone when the process of checking itself may become expensive or when there is not much a chance of losses. SMEs The forwarders should be checked for errors and omissions as it has to be determined whether any loss happening would be recoverable or not. MNCs This has to be done on any account since any loss possibly occurring would create a lot of problems for the company in terms of finances and also reputation. Analysis: The general opinion was that there is a requirement of checking the forwarders for errors and omissions. However, the traditional family companies were not so regular with performing this check, while the other two did find out this aspect of the forwarder they intended to employ. Question 15: Do you perform this procedure? Participants Responses Traditional Family Companies No. SMEs Not always. MNCs Yes. It is important. Analysis: This procedure is not being consistently performed by the companies. Only the MNCs consider it important enough to always perform this procedure, while the SMEs do so only sometimes and the traditional family companies do not conduct it. 4.3. Chapter Summary This chapter presented the findings of the survey. The responses obtained from the questionnaire were analysed and categorised according to the company type. The results have been tabulated accordingly in this chapter and a short analysis has been presented of each question. 5 – Conclusion 5.1. Review of Objectives The purpose of this research was to investigate into the vendor evaluation process and determine how important the process is. One objective of this research was to examine the procedure of vendor evaluation and selection in freight forwarding companies in general. Another objective was to conduct a survey through questionnaires and find out the views of the local companies in question. The companies taken into research were traditional family companies, SMEs and MNCs. A total of 120 companies were considered, 40 of each kind. After a review of the research conducted it can be concluded that each of the objective and aim of the research had been covered. The existing literature review was considered and delved into to gain insight about the process of vendor evaluation and its importance. It was found that the process is very important and should be given all due attention. The survey conducted fulfilled the other objective, which was of checking the local companies for vendor evaluation process. The survey was done through a questionnaire that was sent to 120 companies for finding out about their processes. The results were tabulated and analysed and a conclusion was formed through them. 5.2. Concluding Statements From the research conducted it is to be concluded that the process of vendor evaluation is an important one, and this is particularly the case with larger companies like the MNCs. On the other hand the traditional family companies do not find much requirement of vendor evaluation. For the purpose of ease of understanding the results they were tabulated according to the company type and graphs were also plotted accordingly. Through such presentations the results can be easily interpreted and understood. The results show that the process of vendor evaluation is considered important in the large companies. The smaller ones do not find it very essential and they have their own reasons for it. It was found that the traditional family companies do not find vendor evaluation to be a very important process in their business. They say that since their business is a small one and does not require much resources, nor too much of spending to be done on it, vendor evaluation would be considered a waste of time and capital. However, this is not to say that people belonging to traditional family companies do not feel that this process is to be ignored. They do realise the importance but find it is not of use in just the small companies. Similarly, since they do not attach so much importance to this, they feel it is alright to compromise quality over price of the service charges. For such reasons the vendors that they employ may be of low quality or charge a lower price as compared to the others. The traditional family companies also do not care about the vendor reputation and references. They feel that the job of a vendor is to ship products and every vendor gives the same kind of service, thus no requirement of spending too high an amount over it. This is not the case with the SMEs and MNCs. The SMEs were found to be somewhere in the middle. They did consider vendor evaluation a very important process but were not very willing to pay a very high price for getting excellent services. They felt that the profits and prices are also to be considered and quality is not everything, since they have to take into account their incomes as well. Also, they did not think it important enough to find out about the vendors beforehand. All they want is their services and their work to be done. However, in case they sense trouble they would conduct an investigation of the vendor to find out the facts. SMEs also do not worry much over the references of the vendor although they do feel that this is important. However, the SMEs are willing to forego this check in case they have gotten a good enough deal. Generally it can be said that the SMEs are concerned about the quality as well as the price; but they are ready to forego quality in case of too high charges. They are also ready to employ vendors who are not licensed. The MNCs paid full attention to vendor evaluation and considered it a very important part of business. They felt that the process has to be considered with full attention and enough resources should be used in order to make sure that the company is working properly. The MNCs were ready to pay a high price for vendors if the vendor happens to be providing excellent services. The MNCs worry much about the quality of service they get and that their products are delivered on time to the right person and at the right place. The MNCs were also careful of checking the vendor before employing them. The check was to be made on their references, the insurance, and other similar things. They also saw that they employ licensed vendors. In short, the MNCs considered vendor evaluation a very important aspect of any business and feel that without it the company cannot be successful since there can be problems in its absence. It is to be concluded that the process of vendor evaluation is very important and every company shares this view. However, each kind of company has different perceptions regarding the relevancy of vendor evaluation at their organisation, and each of them employs the process according to the needs and the business requirements. Read More