OMIS 3250 Exam #2

Weighted Scorecard

A primary tool used to select suppliers, which evaluates suppliers against multiple criteria to objectively compare options.

How does a Weighted Scorecard work?

Each supplier is rated on defined criteria; scores are multiplied by weights and summed to determine a total score.

Difference between Selection Criteria and Supplier Performance KPIs

Selection criteria are used during supplier evaluation; KPIs measure ongoing supplier performance after selection.

Why include criteria definitions when creating a Weighted Scorecard?

Clear definitions prevent misinterpretation of criteria by team members.

Why do criteria have different weights?

Weights reflect the relative importance of each criterion to the company's goals.

What should the sum of all weights equal?

The sum should equal 100%.

Point Scale or Scoring Parameter

It converts qualitative assessments into numerical scores for evaluation.

When selecting a supplier based on total cost, what point scale should be used?

Use a scale that favors lower total cost of ownership (TCO).

What is important when creating your point scale?

It must be consistent, measurable, and aligned with company objectives.

Formula for calculating the weighted score

Weighted Score = Sum of (Criterion Score × Criterion Weight)

Common criteria when selecting suppliers

Traditional: Quality, cost, delivery, service; Strategic: Access to technology, innovation, criticality; Additional: Financial stability, sustainability, regulatory compliance.

Why is lead time important when buying products?

Shorter lead times reduce inventory costs and improve responsiveness.

TCO (Total Cost of Ownership)

TCO includes purchase price plus all associated costs (transportation, maintenance, disposal, risks).

How is TCO calculated?

TCO = Purchase Price + Acquisition Costs + Operating Costs + End-of-Life Costs + Risk Costs.

Strategic needs to consider when selecting suppliers

Innovation, risk mitigation, sustainability, regulatory compliance, financial impact.

Real-world application of supplier contribution

Ensures suppliers contribute to competitive advantage and corporate social responsibility.

Questions companies must ask when identifying potential sources

Capacity, quality history, financial stability, delivery reliability, technology capabilities.

Real-world application of supplier information sources

Minimizes risk of supply disruption and ensures long-term partnership viability.

Potential sources of supplier information

Trade directories, catalogs, industry journals, networking, past records, supplier visits.

Difference between RFI, RFQ, and RFP

RFI: Gather information, RFQ: Request prices, RFP: Request proposals including creative solutions.

Real-world application of RFx types

Companies choose the RFx type depending on how well the requirement is defined.

Key supplier selection decisions

Manufacturer vs distributor, location, supplier size, single vs multi-sourcing.

Real-world application of supplier selection decisions

Affects cost, lead time, risk exposure, and negotiation leverage.

Manufacturer vs Distributor

Manufacturer: Direct, may lower cost, control over production; Distributor: Easier access, smaller order quantities, faster delivery.

Real-world application of manufacturer vs distributor

Companies balance price, flexibility, and availability needs.

Single sourcing vs multi-sourcing

Single: One supplier for efficiency & partnership; Multi: Multiple suppliers for risk mitigation & competition.

Real-world application of sourcing strategies

Critical materials may be single sourced for quality; high-volume items may be multi-sourced for supply security.

Addressing short-term vs long-term supply disruptions

Short-term: Emergency orders, substitute suppliers; Long-term: Develop alternative suppliers, diversify sourcing.

Real-world application of supply disruption strategies

Ensures production continuity and reduces dependency risk.

What is a fair price?

Lowest price that ensures continuous supply with proper quality, quantity, and delivery.

Real-world application of fair pricing

Protects the company from stockouts or substandard goods.

How are prices set?

Cost Approach: Covers direct/indirect costs plus profit; Market Approach: Based on supply-demand conditions.

Real-world application of pricing strategies

Guides negotiation or competitive bidding decisions.

Negotiation vs Competitive Bidding

Negotiation: Flexible, innovation-focused, complex requirements; Competitive Bidding: Standardized, price-driven, multiple suppliers.

Real-world application of negotiation vs bidding

Companies select based on product complexity, strategic importance, and market conditions.

Contract pricing options

Firm-fixed-price, Cost-plus-fixed-fee, Cost-no-fee, Cost-plus-incentive-fee.

Real-world application of contract pricing

Aligns supplier incentives with project uncertainty and desired cost control.

INCOTERMS purpose

Define responsibilities for shipping, insurance, and risk transfer in international trade.

Real-world application of INCOTERMS

Reduces disputes and ensures clear cost allocation between buyer and seller.

Value analysis vs value engineering

Value analysis: Reduce cost of existing product; Value engineering: Optimize cost in design stage.

Real-world application of value analysis and engineering

Improves profitability while maintaining performance.

Project charter purpose

Authorizes a project, aligns team, sets goals, and clarifies scope.

Real-world application of project charter

Guides cross-functional sourcing initiatives with clear accountability.

8 dimensions of quality

Performance, Features, Reliability, Durability, Conformance, Serviceability, Aesthetics, Perceived Quality.

Real-world application of quality dimensions

Suppliers are evaluated to ensure products meet customer expectations and regulatory requirements.

Costs of quality

Good quality: Prevention + Appraisal; Poor quality: Internal + External failure.

Real-world application of quality costs

Reduces rework, recalls, and hidden costs affecting profitability.

7-step strategic sourcing stages

1) Identify Need, 2) Form Team, 3) Collect Data, 4) Analyze & Identify Opportunities, 5) Strategy & Implementation Plan, 6) Supplier Selection, 7) Monitor & Report Performance.

Real-world application of strategic sourcing stages

Provides a structured approach to optimize supplier selection and sourcing efficiency.