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Quality factors include:

Compliance with purchase order. The vendor should comply with terms and conditions
as stated in the purchase order. Does the vendor show an understanding of the customer
firm's expectations?

Conformity to specifications. The product or service must conform to the specifications

identified in the request for proposal and purchase order. Does the product perform as

Reliability. Is the rate of product failure within reasonable limits?

Support. Is quality support available from the vendor? Immediate response to and
resolution of the problem is desirable.

Costtotal acquisition cost, not just price.

Consistencysupplier's ability to exhibit quality and reliability over time

Purchase Order
Packaging. Packaging should be sturdy, suitable, properly marked, and undamaged.
Pallets should be the proper size with no overhang.
Documentation. Does the vendor furnish proper documents (packing slips, invoices,
technical manual, etc.) with correct material codes and proper purchase order numbers?

Immediate Response
Problem resolution. The vendor should respond in a timely manner to resolve problems. An
excellent vendor provides follow-up on status of problem correction
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Benefits of vendor rating systems include:

Helping minimize subjectivity in judgment and make it possible to consider all relevant
criteria in assessing suppliers.

Providing feedback from all areas in one package.

Facilitating better communication with vendors.

Providing overall control of the vendor base.

Requiring specific action to correct identified performance weaknesses.

Establishing continuous review standards for vendors, thus ensuring continuous

improvement of vendor performance.

Building vendor partnerships, especially with suppliers having strategic links.

Developing a performance-based culture.

Cost - Ratio Method :

In this method identifiable purchasing and receivi
ng costs are totaled I and related to the
value of the lot received. Higher the ratio,
lower is the rating. The items generally
considered are
(a) Visit to the vendors plant

(b) Sample approval

(c ) Incoming inspection
(d) Reworking cost
(e)Value of rejected parts
(f) Follow up cost, etc


1. Visit of vendors plant - Rs. 100.00
2. Sample approval - Rs. 200.00
3. Incoming inspection - Rs. 75.00
4. Manufacturing losses - --5. Reworking cost - Rs. 175.00
6. Value of rejected parts - Rs. 325.00
7. Miscellaneous cost - Rs. 25.00
8. Follow up costs - Rs. 100.00
Total Cost - Rs. 1,000.00
Total cost of purchase - Rs.1,00,000.00
Quality cost ratio - 1%


Produc No of
No of
item(lots) items(lots) of lot
purchased rejected

of lot


Determination of Quality Rating in Purchase Inspection

QR=QUAN/Q * 100
Q1= Total Quantity rejected during product inspection during period under
Q=Total Quantity offered during product inspection during period under
1 Determination of Quality Rating based on Result of consignee end
checks: (QR2A)
The values to be given based on testing results as under:
QR2A=100 If First Sample has passed in Consignee end Check
QR2A=40 If First Sample has failed but second sample has passed in Consignee end
QR2A=0 If both Samples fail