Sources of Information About Suppliers

Information about suppliers may be obtained in several ways:

1. An interview with the seller. It is usually possible to ob­tain the information you need about a supplier from the sales representative who calls on you. You can ask questions con­cerning the quality of the product, price, service and deliv­ery, and obtain references you can check to verify the in­formation you receive.

2. Visiting the supplier. A visit with a supplier of important components or materials is sometimes desirable when you should know how well equipped the supplier is to meet your needs. Such a visit can give you firsthand insight into the adequacy of the supplier's manufacturing facilities and knowledge of technology as well as labor relations and quality and produc­tion control procedures. The supplier's financial standing and managerial capabilities can also be reviewed. During such a visit you can look at the supplier's basis for quoting prices, discounts, terms and delivery. Such visits should be made only after the choice of vendors has been narrowed down to just a few potential suppliers.

3. From a cost breakdown or cost analysis. Since costs are of major importance in the determination of price in many nego­tiated purchases, it is useful for buyers to obtain a good understanding of product costs. Most suppliers calculate their overhead and general administrative expenses as a pro­portion of direct labor and/or direct material.

Smart buyers, therefore, look to help suppliers achieve re­ductions in the supplier's direct costs (possibly through joint value analysis), since these are likely to have a greater impact on price than other cost savings or a reduc­tion in the supplier's percentage of profit.

Cost analysis is not needed in all purchasing situations. It obviously will be worth the investment in time and effort only if the quantity is large.

In analyzing costs, it is also important to remember that many factors affect the costs of individual firms and even the costs of individual products. Thus, a specific firm may be a high cost producer for one item and a low cost producer for another.

In situations where only one supplier is available or pre­ferred for various reasons not related to price, cost analysis may be the only way for determining whether prices are fair and reasonable. In such a situation, the price is usually negotiated. At the start of such a negotiated purchase, it is desirable to request a cost breakdown from the supplier.

Such a cost analysis might include cost information on:

material and purchased parts

scrap and salvage value (if any)

direct labor

overhead calculation

engineering and development expenses, where applicable

general and administrative expense calculation

depreciation of special equipment

4. References from others who use the supplier. Business con­tacts and references provided by the vendor can often provide information about the quality of products and services of a supplier. This is also one way to find out how well the written and verbal word of the supplier corresponds with actual performance.

5. Trial business with the supplier. When purchasing from a new supplier, it is often desirable to make a few small purchases to see how well the supplier fulfills agreed-upon obliga­tions. When conducting trial business with a supplier, it can be beneficial to maintain large safety stocks of the material being purchased, as insurance.

6. Supplier catalogs. Catalogs are a frequently used source of information about those suppliers who provide them. Such cata­logs are useful not only to determine potential sources of supply but also, on occasion, to obtain published prices.

7. Sales people. Most supplier sales representatives can provide information about possible sources of supply of non-competing products or services. Since they call on many different com­panies, salespeople can bring much information about the qual­ity of suppliers and, when they do not know themselves, can get answers to your questions from some of their customers. All this information is available to the alert, open-minded buyer. However, salespeople can take up a great deal of your time. So as not to be bothered by salespeople at inopportune moments, you may wish to inform salespeople over the telephone or through signs, that there are specified times set aside during which your firm will be willing to see sales representatives.

Many small firms do not have so many salespeople call that specified times are necessary. When salespeople call, it is therefore better to limit the amount of time you spend with them, rather than to shut them out altogether.

8. Trade magazines. General and specialized trade journals often contain advertisements placed by suppliers as well as economic information of value for purchasing decisions.

9. Purchasing files. If you keep detailed files of brochures offering products and services, reviewing these when an occasion arises can provide you with valuable information for selecting a supplier.

10. Trade registers and directories. Thomas' Register of American Manufacturers is one of several widely known trade registers which contains information on the addresses, branches, affili­ations, and often financial standing, of all leading manu­facturers.

11. Trade exhibits. Exhibits provide an excellent opportunity for you to see a variety of suppliers and their services or products. They represent an opportunity to compare similar products of different manufacturers.

12. Yellow pages. The yellow pages within a phone directory contain an accurate listing of local suppliers.

13. Internet

Making The Purchase

The major objectives in making the purchase are:

1. To obtain a fair and reasonable price.

2. To negotiate the terms of sale and determine type of purchas­ing contract.

3. To motivate the supplier to meet all obligations.

4. To develop a solid relationship with competent suppliers.

Fair and Reasonable Price

Cost analysis and Value Analysis, are two methods for obtaining the information with which to negotiate a good price. Competitive bidding and an investigation of published price lists, where available, are two other ways for assuring that the price you arrive at will be a fair and reason­able one. In competitive bidding, it is important, however, not to accept the lowest price, unless it is clear that the vendor will be able to deliver and make a reasonable profit on the sale.

Everyone Requirements To be knowledgeable about the Decision Making Process. We all rely on advice, and tools or techniques, to
assist us in our daily lives.

When we head out To consume, the restaurant menu is the instrument which supplies us with the information needed to decide what to
purchase and how much to spend.

Running a Business also requires making decisions using techniques and information - how much inventory to maintain, what price to
sell it in, what credit agreements to offer, just how many people to hire.

Decision Making Procedure in company is the systematic procedure for identifying and solving problems, of asking questions and
finding answers. Decisions are made under conditions of uncertainty. The future isn't understood and occasionally even the last is
suspect. This manual opens the door for business owners and managers to learn about the selection of techniques that may be
utilised to improve your decision making process in a world of uncertainty, change, and uncontrollable circumstances.

A General Approach to Decision Making Process. Whether or not a scientist, or an executive of a significant corporation, or a
small business owner you are able to gain from boosting your decision making skills. The general solution to systematically
solving issues is exactly the same. The next 7 step method to enhance management decision making may be utilized to examine nearly
all issues faced by a business enterprise.

State the problem. A problem first has to exist and be recognized. What's the problem and why is it a problem. What's ideal and
how do present operations vary from that ideal. Identify why the symptoms (what is going wrong) and also the triggers (why is it
going wrong). Attempt to define all terms, theories, factors, and relationships. Quantify the problem to the extent possible. In
case the issue, not correctly and quickly filling customer orders, then try to ascertain how many orders were incorrectly filled
and how long it took to fill them.

Define the Objectives. What are the goals of the study. Which goals are the most crucial. Objectives usually are stated by means
of an action verb like to decrease, to grow, or to enhance. Returning to the client order problem, the major goals is: 1) to
increase the proportion of orders filled properly, and 2) to reduce the time necessary to order and process. A sub-objective could
include to simplify and streamline the order filling procedure.

Develop a Diagnostic Framework. Next set a diagnostic framework, that is, determine what methods will be used, what kinds of
information are required, and also how and where the information is to be found. Is there likely to be a consumer questionnaire, a
summary of company records, time and motion tests, or something else. Which are the assumptions (facts assumed to be right ) of
the study. Which are the criteria used to judge the study. What time, budget, or other limitations are there. What kind of
quantitative or other specific processes are going to be used to examine the data. (Some of which will be covered shortly). To put
it differently, the diagnostic framework establishes the extent and methods of the whole study.

Collect and Analyze the Data. The next step is to gather the information (by following the methods created in Step 3. Raw data is
then tabulated and organized to facilitate analysis. Tables, graphs, charts, indexes and matrices are some of the conventional
tactics to organize raw data. Analysis is the important requirement of audio business decision making. What does the data reveal.
What facts, patterns, and trends can be viewed in the information. A number of the qualitative methods covered below can be used
during the step to ascertain details, patterns, and trends in data. Obviously, computers have been used widely during this step.

Generate Alternative Solutions. After the analysis has been completed, some specific conclusions about the nature of the issue and
its resolution should have been reached. The next step is to create alternative solutions to the issue and position them in order
of the net benefits. But how are alternatives best generated. Again, there are several well established techniques like the
Nominal Group Method, the Delphi Method and Brainstorming, amongst others. In these methods a team is included, all of whom have
examined the data and analysis. The approach will be to get an informed group indicating a variety of feasible solutions.

Develop an Action Plan and Implement. Pick the ideal solution to the problem but be certain to understand clearly why it's best,
which is, the way that it accomplishes the objectives established in Step 2 better than its alternatives. Then develop an
effective method (Action Plan) to implement the solution. At this stage an important organizational thought arises - who is going
to be responsible for seeing the implementation through and what authority does he have. The chosen manager ought to be
responsible for seeing that all deadlines, tasks, and reports have been performed, fulfilled, and composed. Details are important
in this step: schedules, reports, activities, and communication will be the key elements of any action program. There are several
methods available to decision makers implementing an action plan. The PERT method is a method of laying out an entire period like
an action plan. PERT will be covered soon.

Evaluate, Acquire Feedback and Monitor. After the Action Plan has been implemented to Fix a issue, management must evaluate its
own effectiveness. Evaluation Criteria must be ascertained, feedback channels developed, and monitoring performed. This Step ought
to be done after 3 to 5 weeks and again at 6 months. The target is to answer the main point question. Has the issue been solved?

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