Choosing suppliers: the seven Cs and total cost, not lowest price

Thu runs Mứt Bếp Mẫu, a jam maker in Can Tho (an invented firm, like every figure below). For the Tet season she needs 10,000 paper gift boxes a month and has three quotes: VND 1,800, 1,950 and 2,050 a box. Is choosing the VND 1,800 workshop the same as choosing the cheapest?

This post puts three tools into one table you can try: the seven Cs to screen (the Cs of supplier evaluation), five selection steps (supplier selection and total-cost rating) and a total-cost sum. The post Uniqlo owns no factories compares making with buying; here I compare suppliers with each other.

What do the seven Cs ask about a supplier?

They are seven questions about a supplier's capability, finances and reliability; I suggest asking them before you discuss price. Dokić (2024) says Ray Carter developed the framework in 1995, and he lists a definition for each C (Dokić, 2024, p. 127). The middle column below follows those definitions. The right-hand column is my suggestion of evidence to ask a box maker for.

Two things are easy to confuse. First, Cost is an analysis of the supplier's key financial indicators (Dokić, 2024, p. 127); I read that as whether the workshop can get through a peak season. The price you pay has to be counted separately. Second, the framework only lists criteria. Dokić writes that they can serve as top-level categories in a weighted point rating system (Dokić, 2024, p. 127); setting the weights is your job.

Which steps lead to a supplier choice?

According to the library's summary, Lysons and Farrington (2020, chapter 10) describe two stages: five steps to select and two to manage (Lysons and Farrington, 2020). I could not open the book, so I only retell that outline.

Here is how I would apply the five selection steps to the box order. The application is mine, not the book's.

1. Pre-qualify capability: drop workshops that cannot make the box to specification or do not have the capacity (Capacity and Competency as the entry gate).
2. Agree criteria: the buyer, the packing line that uses the boxes and the accountant settle how heavily each C counts, before any quote is opened.
3. Gather information: samples, defect and delivery records, accounts, quotes with their terms.
4. Weighted scoring: the table further down.
5. Choose the supplier, and decide whether to split the order.

The two management steps come after the choice. One is the relationship type, from short-term transactions on price to a long-term alliance (the supplier relationship continuum). The other is to measure the chosen workshop with the supplier performance index, which the next section works through with numbers.

Is the lowest quote really the cheapest?

Not necessarily. The library notes that the supplier with the lowest unit price may not be cheapest once late delivery, defects and repacking are added (Lysons and Farrington, 2020). The invented example below shows how large the gap can get.

A hypothetical example. Mứt Bếp Mẫu needs 120,000 boxes a year, delivered in lots of 10,000 a month. Thu has trial-batch records and reference calls on three workshops, A, B and C. Each defective box costs the price of the box plus VND 1,500 of rework, because the workshop is assumed not to compensate. Each late delivery costs VND 3m in rush freight and idle staff. The cost of borrowing is 12% a year.

On the quotes, A beats C by VND 250 a box, or VND 30m a year. Add everything up and A costs VND 68 a box more than C, or VND 8.16m a year (VND 253.8m against VND 245.64m). A's index is 1.115: for every VND 100 of purchase price, the firm carries another VND 11.5 for defects and lateness. C's index is 1.009.

The index in the library's summary adds only non-conformance cost to the purchase price (Lysons and Farrington, 2020). I count late delivery as non-conformance; transport and payment terms sit outside the index, so I added those two lines to the total separately.

A gap of 3.3% against C is thin. If A's true defect rate were 1.5% instead of 4%, its defect line would fall to VND 50, its total to VND 2,033, and A would be cheapest again. The table is only as good as the records you put in.

How do you turn the seven Cs into a weighted score?

Set weights that add up to 100, mark each workshop from 1 to 5 on every C using the evidence you collected, then multiply. The scale, weights and marks below are all my own assumptions. Thu gives Consistency the largest weight (25) because boxes arriving late in the Tet rush would stop the packing line.

A is biggest on capacity but clearly behind on consistency and commitment. Cash and Cost both look at finances, so they overlap; merge them if that feels redundant. B and C are close to a tie (3.80 against 3.85), so the score cannot decide. On total cost C is VND 20 a box below B, but the assumption is that C can make at most 8,000 boxes a month.

Thu gives 8,000 boxes to C and 2,000 to B, for a blended VND 2,051 a box. Splitting the order lowers the dependence risk of single sourcing.

For a reference point on how much weight price gets, Dokić tested a ten-C model he modified (not the seven Cs) at a paper wholesaler in Serbia, with three executives interviewed separately. The price indicator received a global weight of 0.0883 out of 1, lower than recommendations from others (0.1418) (Dokić, 2024, p. 131). That is the judgement of three people at one company, not an industry norm.

When does this method fit, and when does it not?

It fits if orders recur, one bad or late batch does real damage, and you can record defect rates and late deliveries. It does not fit a one-off purchase of a commodity many sellers offer: the time spent scoring costs more than the gap. It also does not fit a supplier with no history, because Consistency would be a guess there; a small trial order gives better numbers than a scorecard.

The seven Cs have no environmental or social criteria (Dokić, 2024, p. 127), so a customer who demands them means adding rows. Fix the weights before opening any quote, as in step 2: once people see the prices, they may adjust the weights to suit the workshop they already like.

Going deeper: where do the seven Cs come from, and where do they stop?

According to Dokić, Ray Carter published the framework in 1995 in "The seven Cs of effective supplier evaluation", in the journal Purchasing and Supply Management, pages 44 to 45 (Dokić, 2024, p. 135). The library holds only a catalogue record of that article. I have not read it, so I do not know how Carter defined each C himself, and the definitions in this post are Dokić's. I also have not read the two books Dokić cites for the three Cs added later (Clean, Communication, Culture).

Dokić (2024) is a journal paper by an author at the University of Belgrade, in volume 20 of ASECU; I read the full open-access PDF, 12 pages. He classes the seven Cs as a purely economic framework with intuitive and balanced criteria (Dokić, 2024, p. 127), then proposes a different ten-C version tied to the three pillars of sustainability (Dokić, 2024, p. 127).

The limits lie in that paper itself. Its test used one company, three interviews and four suppliers, so the ranking (UPM first) says nothing about small firms (Dokić, 2024, p. 132). In the part I read, the paper does not follow up whether the chosen suppliers performed better afterwards, and it does not test the seven Cs on their own. Dokić himself warns of rank reversal when criteria change in the AHP (analytic hierarchy process) method, and reports that four criteria in the test shifted the ranking strongly when their weights increased (Dokić, 2024, p. 133).

As for Lysons and Farrington, I could not open the textbook. Everything about chapter 10 above comes from the library's summary of the framework and its concept entry for the supplier performance index.