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Chapter 11

Q. 11.S3

FACTOR-WEIGHTING APPROACH TO SUPPLIER EVALUATION. Erick Davis, president of Creative Toys in Palo Alto, California, is interested in evaluating suppliers who will work with him to make nontoxic, environmentally friendly paints and dyes for his line of children’s toys. This is a critical strategic element of his supply chain, and he desires a firm that will contribute to his product.
APPROACH \blacktriangleright Erick has narrowed his choices to two suppliers: Faber Paint and Smith Dye. He will use the factor-weighting approach to supplier evaluation to compare the two.

Step-by-Step

Verified Solution

SOLUTION \blacktriangleright Erick develops the following list of selection criteria. He then assigns the weights shown to help him perform an objective review of potential suppliers. His staff assigns the scores and computes the total weighted score.

FABER PAINT SMITH DYE
CRITERION WEIGHT SCORE (1–5)
(5 HIGHEST)
WEIGHT ×
SCORE
SCORE (1–5)
(5 HIGHEST)
WEIGHT ×
SCORE
Engineering/innovation skills .20 5 1.0 5 1.0
Production process capability .15 4 0.6 5 0.75
Distribution capability .05 4 0.2 3 0.15
Quality performance .10 2 0.2 3 0.3
Facilities/location .05 2 0.1 3 0.15
Financial strength .15 4 0.6 5 0.75
Information systems .10 2 0.2 5 0.5
Integrity .20 5 1.0 3 0.6
Total 1.00 3.9 4.2

Smith Dye received the higher score of 4.2 and, based on this analysis, would be the preferred vendor.

INSIGHT \blacktriangleright The use of a factor-weighting approach can help firms systematically identify the features that are important to them and evaluate potential suppliers in an objective manner. A certain degree of subjectivity remains in the process, however, with regard to the criteria chosen, the weights applied to those criteria, and the supplier scores that are applied to each criterion.

LEARNING EXERCISE \blacktriangleright If Erick believes that integrity should be twice as important while production process capability and financial strength should both only be 1/3 as important, how does the analysis change? [Answer: Faber Paint’s score becomes 4.1, while Smith Dye’s score becomes 3.8, so Faber Paint is now the preferred vendor.]

RELATED PROBLEMS \blacktriangleright S11.10, S11.11, S11.12 (S11.13 is available in MyOMLab)