ECONOMIC-MODELS FOR VENDOR EVALUATION WITH QUALITY COST-ANALYSIS

Successful vendor-vendee relationship is viewed as an important ingred ient for maintaining competitiveness in the current marketplace. This calls for a careful and comprehensive approach in selecting vendors. T he cost of quality (or better phrased as the cost of ''unquality'') re sulted from imperfections of a vendor's incoming input materials is on e component of the total costs in the evaluation of vendors. The purpo se of this paper is to show that looking at only one dimension of the quality cost is not sufficient and to highlight the importance of havi ng a high quality internal process. We explore the relationship betwee n the vendor's quality cost, the vendor's input quality, and the imper fections of the manufacturing process. We analyze the properties of th e resulting quality cost model, and draw managerial implications in th e selection of vendors.