part

below.

Explanation:

How to approach this

question:

- This is quite an open question and there are many different things you could mention. One way to

approach it would be to use Carter’s 10 Cs- discuss a couple of these. OR just give a couple of criteria

in different paragraphs. Some ideas include: Supplier financial status, Reputation /

,

Quality, Availability, CSR Policies / Ethics / Environmental considerations, Accreditations, Added

Value. This list is not exhaustive.

- If you’re going for Carter’s 10 Cs you could name a couple of these: competency, consistency,

capability, control, cost, cash, clean, communication, culture, commitment

- I don’t think either approach is better or worse. Choose the criteria you know the most about and

write about those.

- The question doesn’t tell you how many criteria to name, so you have to make a judgement call

here. I would aim for 5-6. But if you can only remember 4 that’s fine. The main thing they’re looking

for is that you explain for each one 1) what it is 2) how procurement can check 3) why procurement

would look at that criteria 4) an example. If you do too many you risk not going into enough detail on

each. It’s a balance. 5 is always a good number to aim for if the question doesn’t state.

Example Essay

In the procurement cycle, the supplier selection phase is a critical juncture that demands

consideration. Procurement Managers shoulder the responsibility of identifying and awarding

contracts to suppliers who not only meet immediate needs, but contribute to the long-term success

of the organization. This essay explores various criteria a Procurement Manager can employ to

ensure the selection of the best supplier: financial stability, reputation, quality, availability, CSR

policies, and added value.

Financial stability is a foundational criterion in supplier selection. Assessing a supplier's financial

status involves a multifaceted evaluation, with liquidity and gearing ratio taking center stage. The

acid test, comparing short-term assets to liabilities, offers insights into a supplier's ability to settle

debts promptly, with a ratio exceeding 1 indicating financial health. Meanwhile, the gearing ratio,

reflecting the proportion of capital funded by loans, aids in gauging financial risk, with a ratio below

50% considered low-risk. Relying on published Profit and Loss statements and income statements,

along with financial credit checks from platforms like Dun and Bradstreet, empowers Procurement

Managers to make informed decisions. This financial scrutiny is imperative to avoid entering

contracts with suppliers facing imminent financial struggles, safeguarding against potential

disruptions to the supply chain.

Reputation and references are another pivotal criterion. Seeking references from previous contracts

allows Procurement Managers to gauge a supplier's track record in successfully delivering on similar

commitments. Independent reviews and informal market inquiries supplement this information,

providing a holistic understanding of a supplier's performance. However, caution is advised in

overreliance on past performance, as variables like personnel changes or contract scale differences

may impact outcomes. Recognizing that past shortcomings may have been addressed internally

further emphasizes the need for a balanced approach to reference evaluation.

Thirdly, Quality. Beyond the product itself, considerations extend to the supplier's technological

capabilities, manufacturing processes, and relevant accreditations such as ISO 9001. Physical visits to

supplier sites may be warranted, especially for products like raw materials where samples can be

requested. Adhering to recognized safety standards and assessing factors like fire retardancy ensures

that the quality of manufactured goods aligns with established benchmarks.

Next, Availability is another important criteria to consider. Procurement Managers must evaluate a

supplier's capacity and capability to meet specific requirements. Inquiries about existing contracts

and flexibility in response to demand fluctuations provide insights into a supplier's commitment and

responsiveness. Assessing the supplier's workload and the significance of the buyer in their client

portfolio helps determine the level of attention and service the buyer can expect. A buyer may wish

to avoid working for a supplier who is already stretched very thinly with other contracts.

Corporate Social Responsibility (CSR) policies and ethical considerations have gained prominence in

supplier selection. Beyond legal compliance, Procurement Managers may scrutinize a supplier's

history for convictions or negative press related to corruption, bribery, or fraud. The presence of a

Modern Slavery Policy and Environmental Policy, along with relevant accreditations like ISO14001 or

Fair Trade certification, attests to a supplier's commitment to ethical and sustainable practices.

Procurement would likely seek to appoint a supplier who’s CSR vision aligns with their own

company’s.

Lastly, added value is an important criteria to consider. This is particularly so for Public Sector

Organizations governed by the Social Value Act. In addition to meeting contractual requirements,

suppliers may offer knowledge sharing, training, improved processes, or contribute to social value by

employing local community members or providing apprenticeships. This criterion aligns

procurement decisions with broader organizational goals, enhancing the overall impact of supplier

relationships and benefitting the local community.

In conclusion, a careful combination of financial scrutiny, reputation assessment, quality evaluation,

availability considerations, CSR policies, and added value analysis forms the bedrock of effective

supplier selection in the procurement cycle. Procurement Managers, armed with a holistic

understanding of these criteria, should seek not only to fulfil immediate needs, but also consider the

long-term impact of supplier appointments.

Tutor Notes

- A ‘good’ scoring answer (50-70%) will explain the criteria well and give examples. If you’re looking

for a distinction level answer (70% +) you could also mention advantages, disadvantages and risks

associated with each of the criteri

a. For example, when looking at references and reputation it’s important to know that a supplier

would only ever provide a good reference to you, they would never tell you of a contract that failed.

Another example is that financial data may be skewed- a supplier may have a low score if they are

just starting up or have recently remortgaged a property. It’s therefore important to get a

commentary as well as the figures / scores.

- You could also mention that criteria could be weighted e.g. more importance given to quality than

financial status and also consider how easy or difficult it would be to get the information e.g. a

supplier may say they have lots of availability to deliver the service you require, but they may just be

saying this to win business. How do you know for sure?

- Social Value Act isn’t in this syllabus. If you work in Public Sector procurement it’s something you’ll

be very familiar with. If you don’t or you’re outside of the UK do not worry about this. I’ve just

included it to show how you can bring in your own knowledge to questions like this. You could think

of particular criteria that’s important to your industry and write about that. The Social Value Act:

What is it, and why is it important? (samtaler.co.uk)

- Study guide p.77