Framework

Supplier selection and total-cost rating

The question it answers

When choosing between several suppliers, how should a purchasing manager rate them so the lowest quoted price does not hide the true total cost?

Origin
Lysons and Farrington (2020) ch. 10
Diagram type
Process by phase
Level of analysis
Firm
Topics
Supply chain & operations
Delivery lorry pulling a chain of linked glass boxes, icon for supply chain

Diagram

Supplier selection and total-cost rating

  1. Select
  2. Pre-qualify capability
  3. Agree criteria
  4. Gather information
  5. Weighted scoring
  6. Choose the supplier
  7. Manage
  8. Decide the relationship type (short or long term, strategic or transactional)
  9. Measure with a total-cost index (purchase price plus non-conformance cost, divided by purchase price)

Pitfalls

Pitfall

The supplier with the lowest unit price may not be cheapest once late delivery, defects and repacking are added.

Sources

References

Listed A–Z by author surname, Harvard style. A source with a DOI links to https://doi.org/…; one without links to its page or says plainly that it has no DOI.

  1. Lysons, K. and Farrington, B. (2020) Procurement and Supply Chain Management (10th edn). Harlow: Pearson.No DOISource page