Question

In: Operations Management

Complete the following chart to determine which supplier will you choose according to given scoring system...

Complete the following chart to determine which supplier will you choose according to given scoring system and what are your selections's point of strengths and weaknesses?

Pesi Supplier 1 Supplier 2 Supplier 3 Supplier 4
Technical area (65%) Technical proposal 40% 30%
Matching with project planning 10% 70%
Reorder lead time 5% 20%
Supplier past performance (if applicable) 10% 10%
Economic area (35%) Quotation for the project 10% 50%
Quotation for future projects 15% 100%
Quotation for repairing and maintenance 5% 100%
Supplier dependence rate 5% 100%
Total score 100% 51%
Top supplier to be selected NO

Given the following background information:

Matching with project planning (10%)

Weight

Supplier 1

Supplier 2

Supplier 3

Supplier 4

Variance between project due date and proposed due date (days)

100%

34.00

46.00

46.00

42.00

Worst variance

46.00

Best variance

34.00

Technical proposal (40%)

Weight

Supplier1

Supplier2

Supplier3

Supplier4

Adherence to system design included in the proposal

50%

95%

87%

75%

90%

Historical supplier capability to adhere to design included in the proposal

35%

90%

77%

70%

70%

Effectiveness of communication of technical details

15%

40%

30%

20%

35%

Reorder lead time (5%)

Weight

Supplier1

Supplier2

Supplier3

Supplier4

Supplier lead time

100%

30

40

40

40

Average lead time

37.5

Variance with average lead time

-7.5

2.5

2.5

2.5

Worst variance

2.5

Best variance

-7.5

Supplier past performance (10%)

Weight

Supplier1

Supplier2

Supplier3

Supplier4

order freezing time

20%

0%

90%

50%

60%

payment terms

20%

100%

100%

100%

100%

delivery lead time

20%

100%

100%

100%

100%

open work in progress activities

20%

100%

100%

100%

100%

defects part per million

20%

100%

93%

12%

100%

Quotation for the project (10%)

Weight

Supplier1

Supplier2

Supplier3

Supplier4

Supplier quotation

100%

4900

9000

7250

6100

Average quotation

  

6812.5

Variance with average quotation

-1912.5

2187.5

437.5

-712.5

Worst variance

2187.5

Best variance

-1912.5

Quotation for future projects (15%)

Weight

Supplier1

Supplier2

Supplier3

Supplier4

Supplier quotation

100%

15150

27000

21550

21200

Average quotation

21225

Variance with average quotation

-6075

5775

325

-25

Worst variance

5775

Best variance

-6075

Quotation for repairing and maintenance (5%)

Weight

Supplier1

Supplier2

Supplier3

Supplier4

Supplier quotation

100%

38

40

40

35

Average quotation

  

38.25

Variance with average quotation

-0.25

1.75

1.75

-3.25

Worst variance

1.75

Best variance

-3.25

Supplier dependence rate (5%)

Weight

Supplier1

Supplier2

Supplier3

Supplier4

Supplier dependence rate

100%

0.16

0.66

0.42

0.01

Each sub-item has the following meaning:

Technical proposal: evaluation of three items 1. Adherence to system design included in the proposal (50%) 2. Historical supplier capability to adhere to design included in the proposal (35%) 3. Effectiveness of communication of technical details (15%)

Matching with project planning: for each supplier, the difference between the project due date and the proposed due date is calculated. Then, each supplier receives a score between 0 and 100% calculated as 1 – [(supplier variance – best variance)/(worst variance – best variance)]

Reorder lead time: each supplier offers a lead time value, from which the average lead time is calculated; so, for each supplier, the difference between the average lead time and the proposed lead time is calculated. Then, each supplier receives a score between 0 and 100% calculated as 1 – [(supplier variance – best variance)/(worst variance – best variance)]

Supplier past performance: ongoing suppliers are evaluated against four performance dimensions (order freezing time, payment terms, delivery lead time, open work in progress activities, defects part per million); for each, a threshold value is set (e.g. for defects part per million, it is 1%): each supplier receives a score between 0% and 100% according to how much the target value has been achieved (it is default 0% if the supplier has no performance data available). Each performance has the same weight (20%)

Quotation for the project: each supplier offers a price for this project, from which the average price is calculated; so, for each supplier, the difference between the average price and the proposed price is calculated. Then, each supplier receives a score between 0 and 100% calculated as 1 – [(supplier variance – best variance)/(worst variance – best variance)];

Quotation for future projects: each supplier offers a price for at three future project, from which the average price is calculated; so, for each supplier, the difference between the average price and the proposed price is calculated. Then, each supplier receives a score between 0 and 100% calculated as 1 – [(supplier variance – best variance)/(worst variance – best variance)];

Quotation for repairing and maintenance: each supplier offers a price for maintenance and repair, from which the average price is calculated; so, for each supplier, the difference between the average price and the proposed price is calculated. Then, each supplier receives a score between 0 and 100% calculated as 1 – [(supplier variance – best variance)/(worst variance – best variance)];

Supplier dependence: each supplier receives a score which equal the value of supplier dependence.

Solutions

Expert Solution

Pesi Supplier 1 Supplier 2 Supplier 3 Supplier 4
Technical area (65%) Technical proposal 40% 85% 75% 65% 75% • Technical proposal: evaluation of three items 1. Adherence to system design included in the proposal (50%) 2. Historical supplier capability to adhere to design included in the proposal (35%) 3. Effectiveness of communication of technical details (15%)
Matching with project planning 10% 100% 0% 0% 33% • Matching with project planning: for each supplier, the difference between the project due date and the proposed due date is calculated. Then, each supplier receives a score between 0 and 100% calculated as 1 – [(supplier variance – best variance)/(worst variance – best variance)]
Reorder lead time 5% 100% 0% 0% 0% • Reorder lead time: each supplier offers a lead time value, from which the average lead time is calculated; so, for each supplier, the difference between the average lead time and the proposed lead time is calculated. Then, each supplier receives a score between 0 and 100% calculated as 1 – [(supplier variance – best variance)/(worst variance – best variance)]
Supplier past performance (if applicable) 10% 80% 97% 72% 92% • Supplier past performance: ongoing suppliers are evaluated against four performance dimensions (order freezing time, payment terms, delivery lead time, open work in progress activities, defects part per million); for each, a threshold value is set (e.g. for defects part per million, it is 1%): each supplier receives a score between 0% and 100% according to how much the target value has been achieved (it is default 0% if the supplier has no performance data available). Each performance has the same weight (20%)
Economic area (35%) Quotation for the project 10% 100% 0% 43% 71% • Quotation for the project: each supplier offers a price for this project, from which the average price is calculated; so, for each supplier, the difference between the average price and the proposed price is calculated. Then, each supplier receives a score between 0 and 100% calculated as 1 – [(supplier variance – best variance)/(worst variance – best variance)];
Quotation for future projects 15% 100% 0% 46% 49% • Quotation for future projects: each supplier offers a price for at three future project, from which the average price is calculated; so, for each supplier, the difference between the average price and the proposed price is calculated. Then, each supplier receives a score between 0 and 100% calculated as 1 – [(supplier variance – best variance)/(worst variance – best variance)];
Quotation for repairing and maintenance 5% 40% 0% 0% 100% • Quotation for repairing and maintenance: each supplier offers a price for maintenance and repair, from which the average price is calculated; so, for each supplier, the difference between the average price and the proposed price is calculated. Then, each supplier receives a score between 0 and 100% calculated as 1 – [(supplier variance – best variance)/(worst variance – best variance)];
Supplier dependence rate 5% 16% 66% 42% 1% • Supplier dependence: each supplier receives a score which equal the value of supplier dependence.
Total score 100% 85% 43% 47% 62%
Top supplier to be selected Yes No No No
Given the following background information:
Matching with project planning (10%)
Weight Supplier 1 Supplier 2 Supplier 3 Supplier 4
Variance between project due date and proposed due date (days) 100% 34 46 46 42
Worst variance 46
Best variance 34
Technical proposal (40%)
Weight Supplier1 Supplier2 Supplier3 Supplier4
Adherence to system design included in the proposal 50% 95% 87% 75% 90%
Historical supplier capability to adhere to design included in the proposal 35% 90% 77% 70% 70%
Effectiveness of communication of technical details 15% 40% 30% 20% 35%
Reorder lead time (5%)
Weight Supplier1 Supplier2 Supplier3 Supplier4
Supplier lead time 100% 30 40 40 40
Average lead time 37.5
Variance with average lead time -7.5 2.5 2.5 2.5
Worst variance 2.5
Best variance -7.5
Supplier past performance (10%)
Weight Supplier1 Supplier2 Supplier3 Supplier4
order freezing time 20% 0% 90% 50% 60%
payment terms 20% 100% 100% 100% 100%
delivery lead time 20% 100% 100% 100% 100%
open work in progress activities 20% 100% 100% 100% 100%
defects part per million 20% 100% 93% 12% 100%
Quotation for the project (10%)
Weight Supplier1 Supplier2 Supplier3 Supplier4
Supplier quotation 100% 4900 9000 7250 6100
Average quotation    6812.5
Variance with average quotation -1912.5 2187.5 437.5 -712.5
Worst variance 2187.5
Best variance -1912.5
Quotation for future projects (15%)
Weight Supplier1 Supplier2 Supplier3 Supplier4
Supplier quotation 100% 15150 27000 21550 21200
Average quotation 21225
Variance with average quotation -6075 5775 325 -25
Worst variance 5775
Best variance -6075
Quotation for repairing and maintenance (5%)
Weight Supplier1 Supplier2 Supplier3 Supplier4
Supplier quotation 100% 38 40 40 35
Average quotation    38.25
Variance with average quotation -0.25 1.75 1.75 -3.25
Worst variance 1.75
Best variance -3.25
Supplier dependence rate (5%)
Weight Supplier1 Supplier2 Supplier3 Supplier4
Supplier dependence rate 100% 0.16 0.66 0.42 0.01

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