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INCLUSIVE GROWTH BY REALIGNING SUPPLY CHAINS- Vendor Development
 

Vendor development is one of the popular techniques of strategic sourcing, which improves the value we receive from suppliers.

Vendor development can be defined as any activity that a buying firm undertakes to improve a supplier's performance and capabilities to meet the buying firms' supply inputs . The vendor rating is usually done considering the actual performance of the vendor with respect to:
(i) price - ratio of price accepted to the lowest price offered/estimated price,

(ii) Quality- ratio of quantity accepted and quantity supplied and

(iii) delivery - ratio of time actually taken and time promised. Vendor development strategies constitute an important component in achieving this flexibility.

Establishment and growth of an organization, also requires the development of a well established customer and vendor relationships. Each company is striving to develop and maintain a database of customers that displays characteristics such as satisfaction and loyalty, all within the efforts of ensuring repeat business from the customer, referrals, and organizational recognition. By harnessing the Vendor development techniques companies can develop local small scale companies, local producers in line of their business for getting the material locally and small scale producer. This will not only support these small scale suppliers but also companies get material at much reduced price. This strategy can be very well appreciated from the initiatives of BPCL.

Procurement of goods and services by BPCL locally helps create livelihoods in the communities where they operate. They have considered goods and services procured in India as local.
For procurements other than crude, approximately 90% of their materials, which include ethanol, additives, packages, chemicals and catalysts, are procured indigenously.
Their procurement policies are pre-disposed towards sourcing goods and services from within India. However, due to limited crude reserves available in the country, they are compelled to rely heavily on crude imports. NRL [Numaligarh Refinery Limited (NRL)], which was set up at Numaligarh in the district of Golaghat (Assam) in accordance with the provisions made in the historic Assam Accord signed on 15th August 1985, has been conceived as a vehicle for speedy industrial and economic development of the region.

The shareholding pattern as on 03rd March, 2006 is Bharat Petroleum Corporation Limited (61.65%), Govt. of Assam (12.35%), Oil India Limited (26.00%)] is located in the state of Assam. This region had historically been isolated from rest of India's growth story due to difficult terrain, lack of infrastructure and few access routes, by virtue of its remote location in the north-eastern part of the country, NRL has an intuitive policy which supports procurement of goods and services from local suppliers in the North Eastern region so that it can contribute to the local economy and its development.

This policy, can often pose business challenges due to limited availability of local vendors and contractors who can provide the requisite level of services. Notwithstanding these constraints, NRL’s efforts to procure goods and services from the region as far as possible, is evidence of their commitment to local economic development of the places in which they operate. In the financial year 2007-08, there were approximately 150 local suppliers from Assam supplying materials to NRL, and the economic value generated by NRL for the state of Assam was Rs. 145 million. The quantum of social benefits to local communities in and around NRL is estimated to be Rs. 84.82 million.

 
Click these links to read in details:

Introduction
Inclusivity Measurement
Present Scenario
Supply Chain

Realigning Supply Chain through :

Direct Procurement from Producers/Primary Suppliers
Use of Information & Technology
Vendor Development
Open Tendering
Ancillary Development
Targeted Procurement
Unbundling of Contract

Discussion
 

 
 
 
 
 


By
Digvijay Singh, Dy. Manager (Materials Management)
Research & Development Center for Iron & Steel (RDCIS)
Steel Authority of India Ltd. (Ranchi)

 

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