Supplier evaluation and selection in automotive industry using conditional probability

摘要

Supplier evaluation and selection is one very important factor for the success of a company. There are many supplier evaluation and selection tools and software available in the market. But this approach is different from the others. Here a comprehensive list of suppliers selection criteria is selected and they are divided in 3 supplier selection group. This group of criteria is done based on the relationship among them. All the suppliers are evaluated based on these 3 supplier selection group. The supplier with the highest value is selected. The probability associated with that factor is assigned and at the end overall probability of selecting any specific supplier is calculated. To calculate the overall probability conditional probability is used. This probability calculated tells us which supplier to go for in the pool of suppliers. The higher the probability the better the chances of getting the supplier selected and less risk involved in going with that supplier. This is a cost effective and simple way of supplier selection which can be used by any company, especially by a small size company or a company with low budget only with the help of historical data and market feedback. The purchasing company only need to have team of experts who can figure out the important supplier selection parameters and assign probabilities to those parameters. To the future enhancement to this method, more criteria can be added for supplier selection and evaluation.