Evaluation of Supplier Selection Methodology at Proton and a Comparison with Selected Automotive Companies

Contents Page

List of Tables and Figures...........................................................................3

Abstract...................................................................................................4

1. Introduction.........................................................................................5

2. Scope and Objective.................................................................. ...........6

3. Literature Review........................................................................ ..........6

4. Methodology........................................................................... .............7

5. Limitation................................................................................. ... .......8

6. Supplier Selection Model............................................................ ............8

7. Background of Proton...........................................................................14

8. Supplier Selection Methodology at Proton.................................... ... ........15

9. Supplier Identification, Selection and Evaluation Process............... ...............18

10. Supplier Selection Practise in Global Automotive Industry........................ ....26

11. Conclusion.........................................................................................34

Appendix...............................................................................................37

References............................................................................................38

List of Tables and Figures

Table 1: Commonly used supplier selection method

Table 2: Localization of Parts & Components (Local Outsourcing)

Table 3: Suppliers technical capability evaluation at Proton

Table 4: Supplier technical and commercial criteria analysis

Table 5: Proton's Part Positioning Matrix

Table 6: Supplier ranking based on technical and commercial criteria

Table 7: Volvo's SEM grading system

Table 8: Elements of supplier selection (US and Europe)

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Figure 1: General steps in purchasing process

Figure 2: Existing analytical methods for supplier selection.

Figure 3: Decision Tree representations for three supplier's problem

Figure 4: Proton's Purchasing Function (Procurement) to Secure Competent Supply Sources

Figure 5: Volvo's Group Supplier selection Process

Figure 6: Eight Stopping Parameters

Figure 7: Toyota success with suppliers rest with four principals Source: BCG

ABSTRACT

Automotive firms need to change into a strategic buyer to reduce the cost of purchase at the same time maintain quality and standardising their components, time of delivery and inventory level. This effort will include sourcing Tier 1 suppliers externally or Proton's subsidiary with technological capabilities as a partner by creating a problem solving business model to work together during bottleneck situation. Proton's attitude towards suppliers has changed from confrontation to trust and partnership. The procurement practice of the buyer (Proton) on new and existing suppliers is critical and a strict supplier selection methodology is used. This project presents an investigation on PROTON, their scientific and judgemental approach to supplier selection and looking at its important roles in developing and strengthening supplier-buyer relationship by promoting performance development and improvement programs to continuously secure quality and reliable parts to be delivered on time and at the least cost.

1. INTRODUCTION

Today's business environment is very complex and dynamic. Buying firms that rely on multiple parts face increasing dependency on their suppliers to deliver technologically advanced, defect-free parts, in a timely and cost effective manner. In most of the times, suppliers lack the ability to perform sufficiently in one or more of these areas (Morgan, 1993). If the product or services provided by a supplier is deficient in some aspect, the buying firm faces the decision to look for an alternative source of supply or to work with existing suppliers to solve the problem. Due to difficulty in locating a better source, the high cost of searching for and evaluating new suppliers, buying firms prefer to choose to continue working with their present suppliers to improve performance or tighten their supplier selection criteria or methodology process.

Increasing global market competition by competitors creates shorter product life cycles, higher product quality, cheaper prices and shorter delivery time to meet the demanding consumers of the automotive industry. Company like Proton have to rely heavily on outside suppliers to provide high quality parts, accurate delivery time, lower cost and continuous innovation while focusing on their core competency in making cars.

This project will investigate and analyze the roles played by the Malaysian car-manufacturing firm (PROTON) in selecting its suppliers using rigorous criteria, suggesting scientific methods

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