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Supplier Selection Methodology and Decisions

Reference: UL Engineering Foundation course

Supplier Selection
A B C D E F G H Quality Cost Time Technical support Organisation Commercial Experience Other

Quality of build, attention to detail. Equipment performance (Operational cost/unit output) Value for Money is everything included to enable the work to be completed Can they deliver on time. Response time to enquiry/order & degree of certainty against quoted time. Service / field support spares / technical (International service/spares support) Who / how many do what. Cultural willingness to share knowledge/partner. Strategic importance to Unilever (delivery of Unique capability). Financially sound Have they done this before. Innovation (check via R&D spend/manpower) Willingness to enter into open book reward systems based on delivery of machine/line performance KPI's. (i.e. we cover the majority of actual cost of equipment supply but any profitability and the extent of profitability is determined by real equipment performance)

System Selection
A B C D E F G H Safety Functionality Cost Complexity Operability Maintainability Reliability Standards Is it safe Can it do the job Value for Money Is it simple in operation? Simple to operate Simple to maintain Reliable Built to Unilever standards


LCC : Life Cycle Cost

Definition :
Is the total cost of ownership of machinery and equipment, including its cost of acquisition, operation, maintenance, conversion and/or decommission. Is an economic model assessment over life span

Objective of LCC Analysis :

Is to choose the most cost effective approach from series of alternative to achieve lowest long term total cost of ownership. is to predict total cost on project/machine installation and comparing the alternatives to drive decision on machine/equipment selection.

LCC : Life Cycle Cost

Total Cost that MUST be PAID in one operation



Purchasing Cost of Equipment Initial investment All Cost incurred in Initial SET UP

Further expenses Total Cost to operate All Cost incurred to OPERATE, including further innovation Decommissioning and disposal

LCC Cost Equation

Elements of the LCC equation

Where LCC is Life Cycle Cost, IC= Initial Costs and RC = Running Costs Or

LCC = [Cic+ Cin] + [Ce+ Co+ Cm+ Cs+ Cenv+ Cd]

Cic Cin Ce = initial costs, purchase price (pump, system, pipe, auxiliary services) = installation and commissioning cost (including training) = energy costs (predicted cost for system operation, including pump driver, controls, and any auxiliary services) Co = operation costs (labor cost of normal system supervision) Cm = maintenance and repair costs (routine and predicted repairs) Cs = down time costs (loss of production) Cenv = environmental costs (contamination from pumped liquid and auxiliary equipment) Cd = decommissioning/disposal costs (including restoration of the local environment and disposal of auxiliary services).

Typical LCC Study

Apply to specific/selected and it can drive decision on alternative machines or suppliers, and define its sensitivity In order to have comprehensive figure, it uses 16 Big Losses (JIPM) to cover losses Link and translate in to sensitivity for MARGIN DRIVER To have sensitivity on line speed (driver for output) the LCC is in unit pieces

EUR /year /mio pcs

16 Big Losses, JIPM