Fashion Merchandising

VENDOR SELECTION
CRITIREA

KEY PERFOMANCE INDICATOR

Deepali Pandit & Shikhar Maurya | BFT 5

INTRODUCTION TO KPI

Sourcing and vendor selection are one of the major and crucial action and one needs to do
it so effectively to maximize profit and minimize the bad quality and delays.
Having right information at right time is also considered as an art. While placing orders
there are so many vendors available in market. So, there are so many ways by which you
can select vendor. One of those is selecting vendor by Key performance indicator.
A Key Performance Indicator (KPI) is a measurable value that demonstrates how
effectively a company is achieving key business objectives. Organizations use KPIs to
evaluate their success at reaching targets.
In this Assignment, we act as a garment buyer and we have number of vendors
available, out of this clutter we have to find best suitable vendor.

WORKING METHODOLOGY
Step1: List down all the points which you think is important to consider while selecting a
vendor. (These points are KPIs)
Step2: Arrange them in chronological order i.e. rank them.
Step3: Rate them so that collectively it becomes 100.
Step4: Objectify and explain the ratings.
NOTE: KPI should be easily understandable to everyone. KPIs should be objectified as
much as it can be so that the result remains the same irrespective of the person who is
getting it filled for the particular

STEP 1: LIST ALL THE POINTS

1. Factory Efficiency
2. Man to machine ratio
3. Cut to ship ratio
4. Order to ship ratio
5. On time delivery
6. Average style changeover time
7. Right first time quality
8. Down time percentage
9. Quality to production
10. Productivity
11. Number of non-compliance events per year
12. Term of Payment
13. Certification
14. MOQ
15. Subcontractors
16. Range of products
17. Costing
18. Lead time
19. Experience
20. Communications
21. Buyers
22. Defect Percentage
And the list is endless, but we have mentioned some of the important key performance
indicators.

STEP 2: ARRANGING IN CHRONOLOGICAL ORDER

1. Quality to production
2. Right first time quality
3. Certification
4. Range of products
5. Number of non-compliance events per year
6. Costing
7. MOQ
8. Lead time
9. On time delivery
10. Productivity
11. Factory Efficiency
12. Defect Percentage
13. Man to machine ratio
14. Cut to ship ratio
15. Order to ship ratio
16. Average style changeover time
17. Communications
18. Down time percentage
19. Term of Payment
20. Subcontractors
21. Experience
22. Buyers

STEP 3: RATING
KPI
1. Quality to production
2. Right first time quality
3. Certification
4. Range of products
5. Number of non-compliance events per year
6. Costing
7. MOQ
8. Lead time
9. On time delivery
10. Productivity
11. Factory Efficiency
12. Defect Percentage
13. Man to machine ratio
14. Cut to ship ratio
15. Order to ship ratio
16. Average style changeover time
17. Communications
18. Down time percentage
19. Term of Payment
20. Subcontractors
21. Experience
22. Buyers
Total Rating

RATINGS
9
9
8
8
7
6
6
5
5
4
4
4
3
3
3
3
3
2
2
2
2
2
100

STEP 4: OBJETIFYING

KPI
1. Quality (9)
2. Right First time quality
(9)
(total audit passed to total
audit conducted)

EXPLAINING CRITERIA
AQL 4 or above AQL 2 3 (7)
(9)

AQL less than 2 (4)

85 100% (9)

Less than 70% (4)

70 85% (7)

3. Certification (8)

Compliance &
certified firm (8)

4. Range of products (8)

Offers all types

of products as
needed (8)

5. Number of noncompliance events per

year (7)

No such event in 2 non-compliance More than 2 nonlast 3 years (7)

events in last 5 compliance events
years (5)
in last 5 years (3)

6. Costing (6)

Quote least cost

amongst
vendors from 5
years (6)

7. MOQ (6)

Flexible MOQ as MOQ = 10000 MOQ = larger than

per requirement pieces (4)
10000 pieces (3)
(6)

8. Lead time (5)

Two week (5)

9. On time Delivery (5)

Delivery on time Delayed by 3 days Delayed by more

(5)
(4)
than 3 days (2)

10. Productivity (4)

Avg. productivity Avg. productivity Avg. productivity is

is more than
is equal to the equal
to
the
your
requirement (3)
requirement (1)
requirement (4)

----------Only offers
limited products
(6)

Quote average
cost amongst
vendors from 5
years (4)

One month (4)

Non - Compliance &

certified firm (3)
Only offers single
product (4)

Quote highest cost

amongst vendors
from 5 years (3)

More than
month (2)

one

11. Factory Efficiency (4)

85 90% (4)

70 85% (3)

Less than 70% (2)

12. Defects percentage (4)

0 10% (4)

10 20% (3)

More than 10% (2)

13. Man to machine ratio (3)

2.2 2.5 (3)

2.5 3.5 (2)

More than 3.5 (1)

14. Cut to ship ratio (3)

1 (3)

1.01 1.05 (2)

More than 1.05 (1)

15. Order to ship ratio (3)

1 (3)

1.01 1.05 (2)

More than 1.05 (1)

(It varies as per

organizational structure)

16. Average style changeover Less than 1 day 1 day (2)

time (3)
(3)

More than 1 day(1)

( Time gap between previous style

over and first piece output of the
current style)

17. Communication (3)

Revert in less Revert in

than 24 hours hours (2)
(3)

18. Downtime percentage (2)

0 5% (2)

19. Terms of Payment (2)

Payment
through LC (2)

20. Subcontractors (2)

Certified and
compliance (2)

21. Experience (2)

More than
years (2)

22. Buyers (2)

Prestigious
Buyers (2)

24 Revert in more
than 24 hours (1)

5 15% (1.5)

More than 15% (1)

------------

Direct Transferring
to vendors account
(2)

------------

10 5 7 years (1.5)

Non - Certified and

compliance (0)
Less than 5 years
(1)

Competitors (1.5) Local Buyers (1)

NOTE: Data has been collected by reviewing literature and past experiences.