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Lecture 38 : Vendor Rating — Transcript

by NPTEL IIT Kharagpur · 6,939 words · 1,020 segments · language en · Watch on YouTube

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0:01[Music]
0:22[Music]
0:26hello dear friends welcome to nptl
0:28course on Logistics and supply
0:30management so in the last few session we
0:32discussed about strategic sourcing and
0:35then we discussed how we can you know
0:38finalize different criteria so that we
0:40can uh pick our strategic uh Partners
0:43right so uh these strategic Partners can
0:47be down the supply chain means forward
0:50supply chain or can be uh the in the
0:53backward supply chain right so anything
0:55if you are you know Outsourcing so that
0:58means you are picking your external
1:00strategic Partners right so here we'll
1:03talk about specifically vendor rating
1:06which is very very important and my uh
1:09personal experience in that is that when
1:13we talk about you know sourcing from
1:15different suppliers so this is this
1:17becomes very very important to you know
1:20continuously monitor their performance
1:22against some predefined set of criteria
1:25right so that if there is any lack we
1:28can improve that with the the passage of
1:30time and we can provide most importantly
1:33the positive feedback to our suppliers
1:35because eliminating suppliers based on
1:38any criteria like your price quality
1:41delivery or anything Services they are
1:44providing is not going to work for any
1:47manufacturer any organization who is
1:49providing product and services right so
1:52uh such beautiful concept of vendor
1:55rating and topic so we'll cover uh what
1:58are the different criteria when we talk
2:00about vendor rating why this is required
2:03we'll talk about some steps of vendor
2:05rating some techniques right and uh uh
2:09I'll specifically quote you one uh very
2:12practical example how we are using
2:13vendor rating format in the industries
2:16where we are evaluating our stakeholders
2:19right uh who are providing different
2:21types of material to your organization
2:24right and uh we'll talk about uh one
2:27case study in that and then we'll uh
2:29conclude clude uh this session on vendor
2:31rating so vendor rating is a formal
2:35evaluation system of all the vendors or
2:38suppliers who are providing you uh
2:40different components right so talking
2:43about formal evalu now we this is fixed
2:46that now we have fixed our external
2:48Partners we have picked our external
2:50Partners now we are talking about the
2:52routine repititive purchasing decisions
2:56right so then we are talking about
2:58repetitive purchasing decision obviously
3:00for particular component we have we
3:03might have fixed maybe four five six
3:05suppliers depending upon the you know so
3:07many different parameters right whether
3:09you want uh few suppliers you want many
3:12suppliers you you want to stick with
3:14only one supplier so that depends upon
3:16the situation depend upon the industry
3:18scenario your product uh what you are
3:21dealing with or Services right so
3:23basically when we are talking about
3:25evaluating vendor rating so major point
3:28that come uh uh in our mind is related
3:32to obviously the price is very very
3:34important then quality whatever material
3:36they are supplying and then delivery
3:38schedule right and services means any
3:41queries relate uh related to the
3:44material they are providing or any
3:46complaints are coming how they are
3:48handling or any kind of services how
3:50promptly they are responding to the
3:53queries of the manufacturing unit right
3:56so these are few uh uh important set of
4:00criteria which you continuously evolve
4:02but these are not only the set of
4:04criteria right let's talk about you you
4:06sometimes you may consider the
4:08industrial relation of the vendor
4:09sometime you may you may consider the
4:11financial position of the vendor you may
4:14consider how uh uh they are innovating
4:17or renovating their products designing
4:20different features right whatever
4:22components they are supplying to you
4:24right so these These are broad scenario
4:27right you depending upon whatever your
4:29requirement you can keep evaluating your
4:31vendor right so the basic purpose is to
4:35assign a rating rating or score to each
4:38vendor now when we'll evaluate 1 2 3 4
4:41five vendors so that means we are
4:43prioritizing based on whatever
4:45predetermined set of criteria is there
4:47right so this will help you to make the
4:50informed decisions when you will go for
4:53allocating the orders to different
4:55vendors so that let's say why vendor
4:58rating we are doing the B basic purpose
5:00is so that when we will you know go for
5:04allocating the orders to all those
5:06vendors the maximum order should go to
5:08that vendor which is more strategic
5:11giving us more strategic options that
5:13means who is having the highest rating
5:16right so we should we should uh allocate
5:19the maximum order to that vendor okay so
5:22obviously when you are monitoring and
5:24assessing the vendor performance the one
5:27point is feedback to the supplier which
5:29will help them to continuously
5:31continuously improve or Benchmark their
5:34practices with the best available
5:36practices in the industry right so this
5:39will also minimize the subjectivity in
5:41judgment subjectivity means then you you
5:45in that way will take more informed
5:47decision that to whom you should pick as
5:50the first priority maybe on quality
5:52maybe on price maybe whatever or if you
5:55are going with some let's say uh from
5:58Model A now now you are uh offering
6:01model B in the market with some other
6:03features right so which are those
6:06vendors from all those five vendors you
6:08will pick three vendors which are those
6:10vendors which will provide you material
6:13for your model B right so obviously you
6:17will pick those vendors you are
6:18performing uh fair enough on that uh on
6:22those parameters right so typically we
6:24are calculating different formula
6:26techniques mathematically techniques we
6:28have to find out the weighted score
6:31against each vendor and then we'll say
6:33that this is how we can prioritize that
6:36right so uh this this is important
6:39because it will ensure you the effective
6:41purchasing and procurement right uh and
6:45when you are dealing with those kind of
6:47Industries uh like where you are you
6:49know heavily purchasing items in terms
6:51of volume number quantity in terms of
6:54the value of the product maybe quantity
6:56is not that high but the price is very
6:59very high or maybe you are talking about
7:01those sensitive products on which uh or
7:04components raw material on which the
7:06complete functionality or safety related
7:09parameters are associated of your
7:11product right so in that way you need to
7:13evaluate the vendor usually we are uh
7:17evaluating uh your uh vendors on price
7:21quality what are the price they are
7:22offering what are the quality they are
7:24offering Services level and delivery but
7:27we'll discuss about different scenario
7:29uh uh how and where these different set
7:32of criteria are important so I just give
7:36you one very you know uh uh basic
7:39example let's say uh we are
7:41manufacturing any any home appliances or
7:44automobile industry we are using this
7:46component of screw right so this screw
7:48we are using and coming from our let's
7:52say uh let's say four different vendors
7:57now obviously this is very small
7:59component if you are talking about any
8:01industry your are home appliances the
8:03value maybe if you are using 10 screw
8:05maybe more than that also in one product
8:08so value may not be more than 10 Rupees
8:1015 rupees or somewhere like that okay
8:12that depends upon the know uh the uh
8:16again the specification of the screw so
8:19whenever you are receiving the lot
8:22obviously what is the first step the raw
8:24material is coming and we have discussed
8:27that firstly it is going to within that
8:29manufacturing organization it is going
8:31to iqc please you need to keep this
8:34basic structure in your mind so that
8:36through this session whatever I will
8:39refer you can just relate with how it is
8:41happening in the real world so iqc what
8:43iqc will do iqc based on certain
8:46sampling maybe 10,000 lot you received
8:50maybe they will pick 250 units right and
8:53then they will check those units whether
8:56that lot is okay or not okay now how you
9:00will Define that lot is okay or not okay
9:02obviously you might have defined some
9:04Dimension that length of the screw
9:06should be this
9:08much plus minus tolerance you will say
9:11right then Dia of this should be this
9:14much again another dimension Dia of the
9:17thread should be this much right another
9:19dimension so this Dimension one
9:21dimension two Dimension three right
9:24these are some of the few Dimensions
9:26which are very very important when we
9:28will talk about a very small component
9:30screw right now you check 250 material
9:34and this is not only this is the
9:36quantitative method you checked right
9:38you recorded various quantitative
9:40parameters Dimension 1 2 3 4 5 then some
9:44qualitative measures will be there let's
9:46say qualitative measures uh if extra
9:49material is there on that thread that
9:52means that you can check because this
9:54maybe within this this Dimension is
9:57within limit but still because extra
10:00extra kind of uh material is there maybe
10:04during L operation so that because of be
10:07and tier of the tool or because of Any
10:09technical reason right so some extra
10:11material is coming that means this will
10:13destroy the hole where you are going to
10:15put this screw right so aesthetically
10:19you will check that extra material is
10:20coming on that if shape of that screw is
10:23somewhere may be deviated so qualitative
10:25you are checking uh some parameter
10:28visual parameters we can say right let's
10:31say some visual parameter you can check
10:33for color for kind of this defect then
10:37you can check for maybe flavor depending
10:41if that is important for that industry
10:43these are some of the qualitative
10:45parameters right shape also you can
10:48observe you know uh visually you can
10:51observe so whenever we are making the
10:54vendor rating we have one parameter
10:56quantitative parameters we are
10:58evaluating and then qualitative
10:59parameter now depending upon this
11:02sampling you checked both the
11:04qualitative as well as quantitative
11:05parameters whatever you have set for
11:07that particular component and see this
11:10these if in one industry I'm talking
11:12about this vendor rating format will be
11:15different for all the uh suppliers but
11:20if four suppliers are supplying the same
11:22component then vendor rating format for
11:25all those four suppliers will be same if
11:28it this lot is okay let's say if lot is
11:32okay so what will happen you will go you
11:34will store this in the store Department
11:37from where it will go to the production
11:40floor and production
11:42floor again the production will happen
11:44and finished good will be delivered this
11:46is how it will happen right not okay if
11:49loot is not okay what will happen it
11:51will be supplied back to
11:54the vendor right so that means these two
11:58decision but third decision is also
12:00there if it is not okay and maybe you
12:04are in urgency of that material you
12:07cannot simply reject and send back to
12:09the vendor so what you will pick the
12:11option at that time maybe you will
12:13segregate at your own end right and
12:17whatever okay is there you will move
12:20maybe to the store and whatever is
12:23rejected maybe you will move back to the
12:26uh sorry not iy to the raw material
12:29supplier right so that means third
12:32option is segregation now you see where
12:34this vendor is connected first this
12:37vendor is going to get all the
12:40information feedback from iqc right so
12:43any lot is rejected at IC end means will
12:46be whole lot is rejected based on
12:49sampling will be sent back to the raw
12:50material supplier again they will
12:52process it then again cost will be there
12:55but if it is uh in between that some
12:58rejection is there but you can segregate
13:00and still run uh the production line
13:03because if you'll return back the lot
13:05maybe your whole production line will
13:07stop so what you will think you you will
13:09take the decision let us segregate so
13:11segregation cost maybe 5 to 10 people
13:14are working for segregation that debit
13:17note you will raise through your
13:19accounts Department to that vendor
13:22because it is the responsibility of the
13:24raw material supplier because they are
13:26supposed to supply the okay raw material
13:30right so that cost of segregation will
13:32be there by your vendor production line
13:37then you start producing the you
13:39accepted the lot and you start producing
13:41the product but somewhere you see after
13:44using all every every time you are using
13:48500 screws somewhere around 10 to 15
13:51screws you are getting sometimes this
13:53cap is not there sometime threads are
13:55not there and you could not catch that
13:57in your sampling sometimes uh this shape
14:00is maybe uh uh deviated right so during
14:05that you are now producing the process
14:08this uh Zero Hour rejection that means
14:11you did not process that material and it
14:14is before putting that skew you just
14:17your that person who was working on that
14:20stage he just found that this screw is
14:23not okay right so based on that this is
14:27rejected so this is zero hour rejection
14:29whatever in the end you will use that
14:31lot let's say if 500 pieces are rejected
14:34these are will be sent back to the raw
14:37material supplier and against that lot
14:40will be that debit note will be raised
14:42against that raw material supplier so
14:45this complete picture you keep in mind
14:47so that we can just quickly refer about
14:50that right so Factor considered in
14:53Bender rating quality is first now
14:56quality is you need to meet all the
14:59specification like specification now you
15:01just keep that example in mind your
15:03screw diameter thread diameter cap
15:06diameter screw length these are the
15:08specif then then some visual inspection
15:11you are doing right so that you need to
15:14stick to those Dimensions that means you
15:16are meeting the quality so that rework
15:19or repair the segregation we did right
15:22that is under rework or repair right so
15:25that should not happen price the
15:27competitive pricing what if you are
15:30buying from four different vendors all
15:32are providing different rates right now
15:34you will keep the lowest price vendor
15:37also and highest price vendor also
15:39because we cannot eliminate the vendors
15:42we need to develop the vendors where
15:44they can be more efficient quality can
15:46be improved right so that this is one
15:49system if the our vendors will improve
15:52our total productivity will
15:54automatically improve right so factors
15:57like we'll observe price stability
15:59accurac means whether the prices are
16:02fluctuating from that particular vendor
16:04or they are providing the stable pricing
16:06strategy accuracy in Billing or if they
16:09are changing the price any prior notice
16:11they are giving us so these kind of
16:13things you are you know just recording
16:15with that particular vendor delivery now
16:18we have four vendors out of those four
16:20one is always struggling with the
16:22delivery one person is dedicated calling
16:25him again and again where is the lot and
16:27then we are waiting and that deviation
16:30if he is saying within 5 days it will be
16:32delivered always it is plus minus 3 days
16:34right so that means H variability is
16:37there in that way so that will you know
16:40Force you if that variability is there
16:42lead time is high will force you to keep
16:44extra inventory at your manufacturing
16:47unit so that is extra cost right so this
16:51delivery issues are also very important
16:53Services then how I talked about that uh
16:57uh the services what kind of Serv if we
16:59are raising as manufacturer you are
17:01raising some complaints how quickly and
17:04effectively they are resolving that
17:06complaints right and then sending you
17:08back that we have did we have done this
17:10uh uh correction and then we are again
17:13supplying you the material this is kind
17:15of services right so uh we'll see under
17:19each point what can be included I'll uh
17:23show you one vendor rating format there
17:25we'll see reliability now vendor is like
17:28I talk about one vendor may be uh
17:31struggling with the uh uh delivery right
17:34but he is very good with the quality so
17:37then you cannot eliminate that maybe one
17:40vendor is struggling with maintaining
17:42that quality but you see that vendor may
17:44be very very efficient he is producing
17:46for so many other uh industry players so
17:50that's why maybe because of frequently
17:52transition and change over is happening
17:55so quality somewhere is compromised but
17:57the he's giving giving you 5 to 10%
18:00lesser price than other vendors even
18:03then you cannot eliminate that obviously
18:05you will try to you know improve his
18:08quality as well but yes you cannot so
18:11few vendors are striking on some few
18:13parameters and the others are striking
18:16on some other parameter that's why this
18:18complete basket is required where you
18:20are not relying only on one Bender
18:22Innovation how vendor your vendor is
18:25ready for you know uh uh based on your
18:29whatever feedback you are providing how
18:32proly he is or proactively he is able to
18:35accept that feedback and ready to make
18:38those technical improvements right where
18:41maybe if you will change the outdated
18:44technology then maybe the productivity
18:46will improve productivity will improve
18:47the price will get down the quality will
18:50improve right so how quickly your vendor
18:52is ready to uh innovate and provide you
18:55the unique and differentiated product
18:58right so
19:00relationship relationship means the
19:03effective communication transparency
19:05collaboration you are maintaining with
19:07your vendors right so that will only
19:10happen when you are saying clearly
19:12providing your vendors the feedback and
19:15giving them the Improvement measures
19:17where they can improve I during my
19:20industry experience I have experienced
19:22this thing that you know whenever any
19:25manufacturer is you know coming up with
19:27new product or service Services many
19:29times this happens that you know when
19:32you start purchasing the raw material to
19:34you know make the finished good so then
19:38the very important feedback comes from
19:41the vendor side if we will replace maybe
19:43the design of that component maybe the
19:46material of that component grading of
19:48that component so then the overall
19:50quality performance durability will
19:53increase of that particular product
19:55whatever you are manufacturing so that
19:57will only happen when you are
19:58maintaining the transparent relationship
20:01communication is there so need for
20:04vendor rating obviously we need to
20:06evaluate the performance so that we can
20:09make the informed decision based on
20:11delivery price quality and services and
20:14then we can place the order it is not in
20:16the hand of only purchase Department
20:18that purchase department is raising the
20:20PO and maybe somewhere they are
20:22compromising with the quality or
20:23whatever subjectivity is there they want
20:25to favor some vendor that should not
20:28happen so it should be very very
20:30objective right quantitatively you are
20:32recording all the parameters and then
20:34you are saying that this vendor should
20:36go the 70% order the rest of the vendor
20:39should go 30% order right so this will
20:42also evaluation will also help you to
20:44identify their strengths and weaknesses
20:46right because over the time if you are
20:49coming with one model it will not last
20:52for more than four five or 10 years
20:54depending upon whatever product is right
20:56the nature of the industry because in
20:58that that way we have seen in some
21:00sessions we discussed the technological
21:03advancement is making the product life
21:05very shorter so then product life is
21:07shorter that
21:09means so continuously and repetitively
21:12you are changing the product design how
21:14you will change the product design with
21:16the collaboration of the suppliers only
21:19so supplyer development is the
21:20responsibility of the manufacturing unit
21:23who is buying product raw material from
21:25the supplier it's not only simply you
21:27reject or accept the lot so you need to
21:31uh train them you need to share the best
21:34practices let's say uh as a
21:36manufacturing unit you are big unit so
21:39you may be implementing some B uh for uh
21:43Inventory management you are
21:44implementing Inventory management
21:45software right or warehousing management
21:48software WMS you are using right or you
21:51are implementing Erp system how you can
21:54implement the same technology at your
21:56supplier end so that that efficiency
21:59which you are achieving by implementing
22:00that software that particular vendor can
22:03achieve so if he is efficient obviously
22:06then you can negotiate the price right
22:08risk mitigation this will only happen
22:11when you know that this vendor is always
22:13struggling with the let's say with the
22:15delivery so plus minus 3 days he is
22:18taking so I need to mitigate this risk
22:21so I need to maintain that Safety stock
22:24as per that how I can take the proactive
22:27measures even vendor is struggling with
22:30maintaining the quality how I can you
22:32know find the alternatives to meet that
22:35right cost optimization like if you are
22:38implementing Inventory management system
22:40at your vendor end right so that overall
22:43cost can be of maintaining that
22:45inventory can be minimized so that means
22:48that cost will lead to the increase in
22:51the margin of the overall supply chain
22:54right overall supply chain is complete
22:56one concept we have discussed of system
22:58system concept right and reducing rework
23:02that segregation should not happen right
23:05performance Benchmark now because uh we
23:09are evaluating with respect to some
23:11criteria and those criteria we are
23:13always updating those criteria so in
23:16that way we can Benchmark those criteria
23:19and uh we can just tell our uh vendors
23:23that where they are lagging right and we
23:26can uh uh we can help them to you know
23:29Define the path for the continuous
23:31Improvement supplier relationship
23:33management by evaluating the vendors and
23:36providing continuous feedback
23:38transparent communication and then they
23:41are they know that where they are
23:42standing right so that will help if you
23:45are transparent with your vendors you
23:47know that this this we we are deciding
23:50this very objectively so there your
23:52vendor also know that this is
23:54objectively done right let's say Ola Ola
23:57is now what what is Ola is doing they
23:59are the you know very big player while
24:02providing the taxi services but whether
24:05they own any taxi no they are not owning
24:07so their main stakeholders are the local
24:10taxi uh Union or owners or drivers who
24:14are you know operating or providing the
24:16taxi services right so now this is very
24:20transparent with the driver how you will
24:23behave with the you know whosoever is
24:25taking your services your customers how
24:28uh you are making them comfortable you
24:31are maintaining the cleaniness in the
24:32vehicle how you are taking the optimized
24:34route how you are following the
24:36predefined route whatever is shown in
24:38there how you are charging giving
24:40different options you can pay through
24:42credit card by scan by mobile so if you
24:45are accepting if you are forcing your
24:47sometime this happens if you are forcing
24:49your customer that you pay only by cash
24:51right sometimes they do not turn on the
24:54AC so these kind of things so then you
24:57are rating the each driver you are each
24:59ride you are rating so now drivers know
25:03that if they are getting less uh
25:06feedback so next time whenever there
25:09will be ride option or maybe any
25:12customer is placing the order the nearby
25:15best car driver will take that order
25:19right because that is their system is
25:21working on that distance minimum if so
25:23many taxi drivers are there who will get
25:26the order who is having the maximum fi
25:28that's that's why after completing the
25:29right they are usually asking customers
25:32to give them the best rating right so
25:34what are the vendor rating steps you
25:36need to define the evaluation criteria
25:38very clearly right and I told you this
25:41may vary with the industry somewhere in
25:43Industry maybe price is very important
25:46where you are talking about the
25:47repetitive items routine items right
25:50where you need to be efficient your home
25:52appliances industry sometimes you are
25:55talking about quality is very important
25:57when you talk about High status product
25:59right when you talk about Rolex when you
26:01talk about uh BMW sometimes you talk
26:04about the safety parameters are very
26:06important then you don't want to
26:08compromise with safy quality uh right
26:11price can be increased right so then if
26:13you are uh supplying components uh let's
26:16say to airline industry right who is
26:19building the ship so then there there
26:22the uh importance of the same screw
26:24screw you are using in your uh desk
26:28screw you are using in your chair screw
26:30you are using in car screw you are using
26:33in Aeroplane you just see how it is
26:37important when you are using the same
26:39screw In the Aeroplane right so their
26:41safety import uh parameters are very
26:43important once you have picked the
26:45criteria you need to evaluate all the
26:47criteria right let's say if you are
26:50you're buying
26:52shirt what can be the different criteria
26:54to buy a shirt right there can be cost
26:58then
26:59quality then brand maybe you are very
27:02particular about the brand then
27:06comfortness then maybe
27:09availability right these can so many
27:12other things can be there now for me
27:16maybe uh one person is very very uh
27:19particular about the comfortness so I'll
27:21give the maximum weightage to let's say
27:2330% to comfortness then may next uh
27:28Criterion maybe I will give 20% to
27:31Quality next maybe I'll give maybe 15%
27:34to cost next maybe I'll give 10% I'm
27:38very brand Consciousness right likewise
27:41I'll rate all because all criteria are
27:43not equally important but the other
27:46person may be cost is very important
27:48will give the 70% weightage then I'll go
27:51with maybe rest 30% then I'll see the
27:54quality maybe 10% I'll see the brand 5%
27:59likewise I the other person right that
28:01depends upon the person to person how
28:04they are doing that so this assigning of
28:07the way to criteria will happen uh will
28:09be done using that once criteria are set
28:12now you will gather data and where from
28:15where you will gather the data you are
28:17continuously perform uh recording the
28:19performance of the uh vendors uh through
28:23your iqc from where you are checking the
28:25lot through your production floor we are
28:27zero hour res is coming through your
28:29accounting purchase Department how
28:31quickly they are accepting the order how
28:33quickly they are processing the order
28:34and when you are making the payments and
28:36how they are settling the issues so then
28:39you will record data on all those
28:41parameters once it is done you will
28:43evaluate the Performance Based on
28:46whatever score maybe 1 to 10 1 to 10
28:48score you calculated but for all maybe
28:51you will not Calculate 1 to 10 if cost
28:54is important so you'll wait little
28:56higher then maybe L is the quality so
29:00then quality you will rate 1 to8 scale
29:02some other maybe brand you will rate
29:05maybe 1 to 5 scale depending upon
29:07whatever weight you want to offer
29:09otherwise out of 10 you can give the
29:11score and then each score you can
29:13multiply with their weightage if cost is
29:1610 uh maybe 20% so whatever score you
29:20are getting for cost you multiply by 020
29:23right and if you are giving quality
29:25maybe 15% you multiply quality score
29:28Maybe by .15 this is how you will find
29:32out the performance and overall rating
29:34you will sum up all the score for all
29:37vendors V1 what is the vendor rating V2
29:40what is the vendor rating V3 like this
29:42we'll find out then we'll review and
29:44validate because for every lot you are
29:47receiving from that vendor you are
29:48making those valuations so keep on
29:51checking evaluating right so we give you
29:54continuous feedback and then this result
29:56will be given back to the vendor so that
29:59this should be very transparent so that
30:01they can make the improvements right so
30:04Ola should share their feedback with the
30:05drivers as well so that driver should
30:07know that this time he made this mistake
30:10did not turn on the AC properly so that
30:12that's why he got little lesser ranking
30:15right then use ratings for decision
30:18making next time
30:20Olaf fed that in their system so based
30:23on ranking based on how near that taxi
30:26driver is the will allot the rides to
30:30different taxi drivers so what are
30:32different techniques we'll quickly go
30:33through these methods how we can
30:35calculate the vendor rating categorical
30:38plan is first subjective method where
30:40you can you say quality is one delivery
30:43is another one price is another one
30:45let's say three parameters are there
30:47quality maybe sub parameters are there
30:49delivery sub parameters are there price
30:52also sub parameters are there so either
30:54good or satisfactory or poor you will
30:56rate on each subdimension each sub
30:59parameter right this is categorical plan
31:02but this is uh subjective method right
31:06because if I am evaluating on quality
31:09what is good for me may be very good for
31:11other person or may be satisfactory for
31:13other person because my evaluation uh uh
31:18in whatever mind state I'm having at
31:20that time or maybe usually my evaluation
31:23is maybe uh sometimes we usually say we
31:27usually get this feedback as teacher
31:30that marking is very strict the other
31:32person says that may marking is very
31:34lenient right same person evaluating the
31:36same question paper weighted plan
31:39already I talked you let's say
31:41quality one uh person got out of 10 we
31:45are uh evaluating vendor one right so
31:48vendor one got eight on quality delivery
31:51sevens price five right so now I'll
31:55provide the weightage quality is let's
31:57say 4 % important this uh delivery is
32:01let's say uh 35% important and then rest
32:05is25 I think so that is important so
32:08whatever score I will get out of this by
32:10multiplying this I'll sum up this score
32:12this is the vendor uh weighted Point uh
32:15rating for vendor 1 same way I'll
32:18calculate the weighted Point rating for
32:20vendor 2 34 right cost ratio Plan cost
32:25ratio plan is calculated whatever is the
32:27cost occurred to acquire those Services
32:31right so if I'm talking about let's say
32:33the example is the delivery cost is
32:355,000 rupees and the total cost of
32:38acquiring that lot is 1 lakh rupees so
32:42delivery cost ratio will be how much
32:44delivery cost is adding to the total
32:46cost so this is 5,000 divided by 1 lakh
32:50will be 10% that means whatever order we
32:53are placing delivery cost is adding 10%
32:56into that so we can see whether we where
32:59is The Benchmark if other Industries are
33:01managing somewhere around 7% delivery
33:04cost that means we need to make sure
33:06make efficient our delivery Logistics
33:09distribution Network the inventory cost
33:11is let's say 20% so other Industries are
33:14maintaining somewhere around 12 to 133%
33:16why our inventory cost because we are
33:18keeping extra stock so that cost to
33:20ratio M you can maintain Force decision
33:23Matrix this is a kind of pair wise
33:25comparison Matrix we are doing where we
33:28are evaluating the set of criteria with
33:30respect to each other criteria one
33:33quality is important than delivery so if
33:36it is so we'll assign weight one
33:38otherwise we'll assign weight zero this
33:40is just how you can assign weights right
33:42service cost ratio particular Services
33:46you are providing like intangible
33:47services so then you can you know
33:50providing those extra Services see if we
33:53are saying that any uh you know problem
33:57with using this product or Services you
33:59can call our customer care center that
34:02means setting up customer care services
34:04is cost to me right so that is cost this
34:08is how you can understand so IVM quality
34:10rating system so they are calculating
34:12the quality cost means desired cost of
34:16inspection and actual cost because
34:19always actual cost of inspection is uh
34:21inspection is higher right so how we can
34:24reduce the cost of inspection I talked
34:28about in quality uh Insurance when we
34:31talked about quality tools how quality
34:34is free so the purpose of quality
34:37department is not to inspect qu the
34:40purpose is to seize the whole inspection
34:43no inspection should be there because we
34:46want that it should be error free so how
34:48we can error free when there is no
34:50inspection is required right when you
34:52are error fee well quality rating system
34:55this is how many Lots you are receiving
34:58uh and then how many are rejected right
35:01so based on that ratio you are defining
35:03that lot Quality Index what is lot
35:06Quality Index so how you are
35:07prioritizing different scenario let's
35:10say L1 is lot one you
35:13accepted as it is no rejection is there
35:17then L2 number of lots rejected by
35:20sampling but still you labeled means you
35:22segregated you run that lot in the
35:24production line right number of lot
35:27rejected and dispositioned rored at the
35:30supplier end segregated at the supplier
35:32end then Lots rejected and returned back
35:36so that means that means if you are
35:39returning back those component that is
35:41cost Transportation cost right once you
35:44received again you send back that
35:45Transportation Cost Storage cost
35:48inspection cost again they will
35:49transform it and then will maintain it
35:52and then you are getting the repaired
35:55product when I'm paying for new prodct
35:57product why I should use the repaired
35:59one so as this will grow you you can see
36:04here the cost priority is attached
36:07higher when you are you know sending
36:09back the material that means the
36:10performance will be reduced so this is
36:13what I'll share with you one quality
36:16format uh which in Industry we are using
36:20you can just go through okay so here is
36:23one vendor rating format which I used to
36:26use when I was uh
36:28uh working as you know quality engineer
36:31so in one of the organization so you can
36:33see so this is uh the vendor rating
36:36right uh by co-maker whosoever co-maker
36:38means manufacturer vendor rating for
36:40particular vendor number is defined and
36:42then date of issue vendor cender name
36:45you can mention here the part name or
36:48code part code right because different
36:51component small small components are
36:52there if you are using 10 different
36:54types of screw so that code will be
36:57different for all right so all that
36:58information will come and then you can
37:00see the first one is quality so quality
37:03means all the parameters related to
37:06Quality see now quality description
37:09sheet this is the sheet I was talking
37:12about how you are developing the quality
37:13description sheet you have defined the
37:16screw diameter thread diameter then the
37:20length of the screw that is quality
37:22description sheet and then bizi you are
37:24inspecting color you are inspecting
37:26flavor you are inspecting whatever
37:28Dimension you are recording that comes
37:30under your quality description sheet now
37:32based on that either you will accept the
37:34lot or reject let's say uh because this
37:37is done for 25 Lots if all 25 lots are
37:41accepted that means 0% rejected that
37:44means that vendor will get five out of
37:47five if two loads are rejected vendor
37:50will get one score right so this is one
37:53parameter then quality complaint note so
37:56how many quality comp complaint notes
37:58you raised against that vendor let's say
38:01no quality complaint note to the vendor
38:04that means five rating no complaint
38:06against that vendor so accordingly one
38:08complaint two complaint you will assign
38:10the rating then once you raise the
38:13quality complaint how quickly you are
38:16getting the Kaa corrective action and
38:18preventive action and they have done the
38:20corrective measures and sent you the
38:22report let's say if one uh your supplier
38:26is you you know kaapa report he has
38:29submitted and no reputation in next 10
38:33lots that means he'll get the 10 out of
38:3610 right because he quickly uh worked on
38:40that and improved that right so then you
38:43can see this is not fixed it should be
38:4510 only for some product you may take 20
38:48for some product you may take five right
38:50so this is just one example detailed
38:53inspection report if your vendor is
38:56sending sharing with you all the time
38:58detailed inspection report means
39:00whatever lot you are inspecting that
39:02means you will give five if he is not
39:03sharing you can give zero in
39:05intermediator level also you can assign
39:08vendor process maturity and setup so how
39:13mature he is with the process iqc pqc
39:16oqc means all quality measures they are
39:19taking right they have standardized
39:21their production process so five means
39:23then if they are generating all these
39:26reports they will get five right then
39:28vendor aligned to this is uh related to
39:30Philips program because I was working
39:33with that so uh uh there is flips B
39:36program right under that program if you
39:39are fully aligned whatever measures they
39:41have suggested you have also implemented
39:44so then five points right if any means
39:46particular suggestion from any P right
39:49so rejection part on the line this is
39:51what I was talking about your Zero Hour
39:54rejection you started using the screw
39:56but suddenly you realiz that the d uh
39:59the cap is missing the thread is missing
40:02right so then how many times how how
40:04much is the rejection 100 units you are
40:07using what is the rejection rate less
40:10than 0.1% you will give five marks uh
40:12somewhere equal to less than 2% you will
40:15give three marks likewise now this is
40:17related to Quality now next is price
40:20performance so obviously ply Pro
40:22performance how you will record whether
40:24that person has increased the price
40:26maintained the the same price or lower
40:28down the price if lower down the price
40:31by 5% you'll give 10 because maybe you
40:35have increase the lot quantity if less
40:37than by 2% you will give the five marks
40:40right if the person has increased the
40:43price you will give the zero marks right
40:45so this is how you'll uh do the pricing
40:49okay so then delivery so related to
40:51delivery whether you are receiving all
40:53the deliveries within plusus 5%
40:56deviation or 7% % deviation one or two
40:59days here and there you will this this
41:02see you can see the highest priority is
41:05given here to the delivery right 40
41:08marks if you are delivering on time
41:10you'll get 40 marks right so delivery is
41:12very important responsiveness how
41:15quickly you are generating the report
41:17Capa report or how quickly you are
41:19responding to your you know uh whatever
41:22complaint your manufacturer is Raising
41:25and how quickly you are you know uh
41:28confirming the purchase order once the
41:30purchase order is accepted and then you
41:32are confirming it within 3 days so that
41:35means you'll get three marks right so
41:37here confirmation is not that important
41:40but you can see here the delivery is
41:43very important because if somewhere I
41:45will lack with the inventory my all five
41:48500 people will sit down idle on the
41:51production line so overall rating will
41:54uh calculate if it is less than 50 you
41:56will say poor if it is 80 50 to 80
42:00average anything more than 80 means good
42:03right so this is one format how you can
42:06go for the vendor rating so same way you
42:09can develop the vendor rating uh as per
42:12your uh industry requirement right so uh
42:17then advantages of vendor rating you can
42:19see minimize subjectivity in taking
42:22decisions obviously we discussed there
42:25is no power with the purchase Department
42:27that if they want to you know uh favor
42:31some vendors they cannot do that
42:33feedback from all area from purchase
42:36Department you are getting that whether
42:38they have raised the purchase price or
42:39not accounting how many days they are
42:42giving us to settle down the payment
42:44right then quality Department what are
42:46the quality features they are lagging
42:48your vendors are lagging delivery again
42:50store department will help us to find
42:52out that so all these departments are
42:55giving you the feedback back and that
42:58feedback is given back to the vendors so
43:00better communication will be there
43:02overall control to the vendors specific
43:05action if you are struggling with
43:07maintaining the inventory you will get
43:08that feedback right so continuously we
43:12will re review those standards so we can
43:14see that this vendor rating is so
43:17important if you can optimize vendor
43:19your because from where your supply
43:22chain is originating from the vendors so
43:25first pillar is vendor only so so if
43:27you'll manage that pillar uh very
43:30effectively efficiently there only the
43:32supply chain performance will start
43:34right we have included some qualitative
43:36quantitative measures so you can see
43:39this is not only the fixed criteria you
43:42depending upon your industry you can
43:45work on those criteria we have so many
43:47research papers your deciding the
43:50vendors picking the vendors vendor
43:52rating multicriteria decision making
43:55techniques are there we are using
43:56methodology like uh analytical hierarchy
43:59Process net analytical Network process
44:01tops is to you know set the Benchmark
44:05and demal Analysis multicriteria
44:07decision- making tools we are using to
44:09evaluate the performance of the vendors
44:11to find out where they are right now
44:14what is the gap how we can fill that Gap
44:16right so this is all about vendor rating
44:19these are some of the references you can
44:21go for further rating so thank you very
44:24much

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