Answer to Question 1
The most important factor in vendor selection is usually quality. Quality often refers to the specifications that a user desires in an item. The procurement professional compares the actual quality of a supplier's product with the specifications the user desires. In actuality, quality includes additional factors such as life of the product, ease of repair, maintenance requirements, ease of use, and dependability. In today's Six Sigma and lean environments, not only are quality standards higher, but suppliers are typically counted upon to take major responsibility for quality.
Reliability comprises on-time delivery and performance history, the second- and third-ranked factors for most procurement professionals. Reliability is often considered a part of a total quality management program.
Risk is a factor of great contemporary relevance. One way this may occur is if there is likely variability in the cost of purchased products or services that may result in higher prices. Other ways in which risk may occur include supply uncertainties and unusual variation in delivery lead times.
Capability considers the potential supplier's production facilities and capacity, technical capability, management and organizational capabilities, and operating controls.
Financial considerations In addition to price, the buying firm considers the supplier's financial position. Financially unstable suppliers pose possible disruptions in a long-run continued supply of material.
Desirable capabilities include several that may be helpful depending on the type of purchase being made and the type of relationship desired between the customer and the supplier. The impression or image that the supplier projects has a similar effect on supplier selection, as well as cultural compatibility. Other factors that may be important include training aids, packaging, and repair service availability.
Answer to Question 2
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