Chapter 10 - Sourcing and Supply Management
10-11
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Cost to Buy
Forecast (gallons/year) 30,000 45,000 45,000
Total Price ($2.85/gallon) $85,500 $128,250 $128,250
Cost to Make
Direct Labor ($.25/gallon) $7,500 $11,250 $11,250
Direct Materials ($2.00/gallon) $60,000 $90,000 $90,000
Total Direct Costs $67,500 $101,250 $101,250
Equipment Depreciation $20,000 $20,000 $20,000
Other Overhead Costs $15,000 $22,500 $22,500
Total Operations Cost $102,500 $143,750 $143,750
7. Your company has used competitive bidding to select a supplier for janitorial services. Three
suppliers returned acceptable bids within the allotted period. Based on these ratings from the
supplier assessment, which supplier appears to be the best? Why? How would the final
selection decision be made?
Multiple each supplier’s rating in each category by the weight. Sum the score for each
supplier.
Category Weight Supplier A Supplier B Supplier C
Rating Score Rating Score Rating Score
Quality
systems
40% 3 1.2 3 1.2 4 1.6
Financial
stability
25% 2 0.5 3 0.75 1 0.25
Management
experience
20% 2 0.4 3 0.6 3 0.6
Price 15% 4 0.6 4 0.6 5 0.75
Total
Weighted
Score
2.7 3.15 3.2