SOURCE SELECTION - SOME CASE STUDIES

A. 1. Universal Equipment Manufacturers is a large multi-divisional company having diversified lines of manufacture in their different divisions as indicated below:

(a) Steel structures for bridges, sluice gates, cranes, railway wagons, etc.

(b) Lifting and hoisting machinery for cranes/gates, etc.

(c) Railway wagons and bridges (d) Road rollers

(e) Mining and haulage machinery

2. The number of personnel working in this company is about 10,000.

3. The company has been in existence for quite a few decades and had been making profits earlier. During the past few years, however, the company has been incurring/losses.

4. The investment in this company is nearly Rs. 100 crores. In order to maintain growth rate and competitiveness, old equipments are being replaced, and balancing facilities added with a planned investment of Rs.

5 crores.

5. The materials management set up is rather fragmented. Most of the purchases are being done by each of the divisions. Only a few items are being purchased centrally. There is no procedure for enlisting the suppliers. The company has, however, drawn up a list of number of suppliers for about 75 items.

6. Shri Kutty, who has taken over as the Chairman-cum-Managing Director appreciates the importance of source selection/source development and is quite concerned. He discussed the position with his Finance Director and decides to appoint a consultant.

7. Give your advice as a consultant.

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B. 1. Dynamic Enterprises is a large multi-unit concern in private sector Manufacturing various components of machinery.

2. The Head Office of the company gives sufficient importance to the materials management discipline and has formulated policy

guidelines on the subject for their various divisions . ...

3. In the matter of vendor registration/vendor rating, their policy contemplates issue of advertisement in all leading newspapers once in three years, for registration of suppliers listing out the various types of purchases that may be made during the period of next three Years. The various hand-books could also be referred to for this Purpose. ·m case of imported items, trade representatives of the concerned foreign country in India would also be addressed. The list of suppliers thus compiled, should be scrutinised and approved by a committee consisting of Quality Control, Materials Manage- ment and Finance Representatives from the angles of quality rating, delivery, price and performance. While a general survey may be made once in three years, the list would be kept up-to-date with Deletions and additions as they come to the notice from time to time.

So long as these suppliers on the approved list are contracted and quotations obtained, the purchase could be considered as if it was an advertised tender.

4. For purposes of vendor evaluation, the head office felt there ought to be a comprehensive computerised system for vendor rating whereby prior to closing of the purchase order file, when an order is considered executed, the concerned purchase officer shall raise an order performance sheet which will give material code wise list of vendor performance of all the vendors against all the purchase orders and subsequently, there would be an evaluation sheet which would be available to the concerned purchase officer as and' when a further tender is to be issued in order to decide the vendors which Could be addressed.

5. The various factors which had been considered for evaluation were quantity factors giving weightages for deviations, rework, rejec- tions, quantity and delivery ratings, indicating the number of days for which delivery was delayed as well as quantity supplied, and price ratings, service ratings, etc.

6. The policy and the system for evaluation which was proposed may be discussed.

C. 1. Associated Engineers is a new company manufacturing transport- tation equipment.

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2. Shri Raman, the Chairman-cum-Managing Director is quite alive to the various Government policies and has appointed Shri Kundu as Ancillary Development Manager for promoting ancillary units. His effort is to standardise suppliers as far as possible. He has, accordingly, advised his Purchase Manager, Shri Tikku, to work in close co-ordination with the Ancillary Development Manager and promote ancillaries.

3. Shri Tikku who was earlier working in another concern takes the plea that his past experience in regard to ancilliarisation has not been happy and whenever ancillary unit is set up there is constant difficulty and problem regarding the execution of orders, fixation of prices, delivery schedules, etc. Consequently, he is totally against ancillarisation and tries to convince the CMD that ancillarisation is not a good proposition. Give your, comments.

D. 1. Machinery & Equipment Manufacturers, a concern in Haryana, is manufacturing various types of equipments required by the fertiliser industry. The range of items held by them in their stores inventory is roughly 50,000. The procurement of these items is being made through several hundred suppliers.

2. Shri Tuli, the Purchase Manager of this concern, recently attended a seminar on materials management, where considerable stress was given towards buyer-vendor relationship and how such relationship could result in cost reduction.

3. Shri Tuli, on return to his company, suggested to the CMD that he would like to invite all the vendors on his list of approved suppliers for a get-together with a view to promote good relations. The CMD did not approve the proposal. The Purchase Manager, therefore, decided that he would write to all the vendors on the list of approved suppliers and sent the following letter:

Dear Sir,

You are one of the vendors whose name appears on the list of approved suppliers being maintained by us.

In the present day situation, the supplier and purchaser must join hands and make co-ordinated efforts to control and reduce the rising trend in prices.

With this thought in mind, we approach you as a Specialist in your product--and request that you may review your manufacturing processes and handling arrangements, and let us know how we, as buyers, can help you. It is understood that the quality of the product should be maintained and performance improved.

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We assure you that any suggestions/recommendations you make will be given due and careful consideration by us. I am convinced that such an exercise is very necessary and will be mutually advantageous.

Yours faithfully,

Exercise:

You may discuss the situation and formulate future strategy.