You are tasked with selecting the suppler for a new part from four possible vend

Question

You are tasked with selecting the suppler for a new part from four possible venders A, B, C, and D. You have data related to quality, price and delivery terms. Assuming each of these three aspects equally weighted by your purchasing organization, which supplier would you choose given the following information? The critical part dimension for the quality data has a specification of 2.5±0.05 cm; and daily demand of 25, with a daily standard deviation of 30 units; 365 days a year. For this part your organization prefers a service level of at least 95%.

A

B

C

D

Price/unit

X , in cm

?, in cm

Leadtime (days)

Dev. (days)

Vender

A

B

C

D

Price/unit

10 10.5 11.5 9.5

X , in cm

2.504 2.497 2.496 2.506

?, in cm

0.013 0.0011 0.01 0.011

Leadtime (days)

20 15 10 20

Dev. (days)

5 5 3 10

Explanation / Answer

Answer:

So we need to select the supplier who can meet the above requirements.

Price Point of View: From Price point of view all the four suppliers are comparableand there is no much difference in the unit price. Supplier D is the best supplier for unit price as it offers $9.5/unit, followed by A ($10.0), B ($10.5) and C ($11.5).

Quality point of view: From quality point of view, all the four suppliers are comparable, and they can meet the requirements of 2.5±0.05 cm, as they can produce within the 6 microns.Thus from quality point of view all are equally placed. So quality is not a differeciator.

Delivery Point of View: Delivery days and leadtime is the key, as the standard deviation is 30 nos. So minimum the delivery and lead time time, higher the preference for the supplier.

So based on all this analysis and importance of lead time and delivery, the best suitable option is Vendor C

Preferred Option : Vendor C : Because the price, and lead time /delivery time are optimized. Thus slight increase in price provides reduced delivery and lead times. Hence for the organization lead time and delivery time are very important, so the organization will prefer to have better lead time and delivery time @ slight increase in unit price. Thus Supplier C is preferred supplier.

A B C D Price 9.5 10 10.5 11.5 Yearly Cost 86688 91250 95813 104938 Lead time 20 15 10 20 Dev.(days) 5 5 3 10 Quality OK OK OK OK

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