An article was published in MasterControl’s November newsletter that simplifies the process of supplier selection. A grid analysis is great for almost any decision-making situation where you want to objectively compare multiple options. It also complements many other decision-making tools as well.
Per the article, factors that should be considered in the grid analysis for supplier selection may include:
Cost – Initial quotations and negotiations are not always representative of future costs. However, this is certainly an important competitive advantage if that’s the desired positioning. Contractual commitments should be discussed to avoid incremental increases.
Quality/Standards – Depending on the industry, specific supplier audits may be required. If the organization requires ISO or other certifications, audit reports are a useful snapshot of the supplier’s strengths and weaknesses in specific areas. This should incorporate management as well.
Location – The geographic component of supplier selection not only affects cost but it can also be required for certain products.
Shipment Expectations – The quotation and audit reports should include enough information to reasonably determine how well the supplier complements your existing demand schedules.
Expansion Capabilities – Long-term strategy will require that any supplier partnership considered important during the expansion plans of the organization should not be overlooked.
Grid analysis can be done in two ways, with or without weights. If the assumption is that each factor decided on is equal in importance, go through each supplier and provide a rating for each factor based on all information available. Do this for each of the three and total each row. Scale each choice from 0 (poor) to 5 or 10 (great), and you don’t have to use different ratings for each one. Assign each factor and supplier the rating it deserves based on all of the available information.
For most situations, we know that all factors are not equal in importance. That being true, a grid analysis can adapt to placing weights of importance on each factor. To do this, multiply out the factors for more accurate results. Weights may include something that is not important at all, which may have no value assigned, or something that is very important that may be assigned a weight of 5 or 10. If a factor is determined to be twice as important than others, assign it a weight of 2.
Grid analysis can also incorporate team decision-making and offers useful comparative perspective as well. If everyone on a team completes the grid analysis process individually, take the final score of each supplier from each team member and add them together. Divide that number by the number of team members. Do this for each supplier.
View the full article, including example data sets here.