This week’s assignments were very interesting, we learned how to Quantify and Compare, which is very useful when you need to choose between options that are different from each other.
In order to Quantify and Compare you need to follow four steps:
- Choose the criteria: Basically in this step you need to decide what are the key characteristics that are important to you. For example, this week at my class, we were trying to decide which supplier was the best for our business. So I chose a few things that I knew were important to me: price, delivery time and minimum order.
- Rating: this is very simple, it consists in “grading” each option according to the criteria of choice. In the class material I found something that I think is important to watch when doing this: “You’ll typically want ratings that are very reliable and not based on the evaluators’ personal idiosyncrasies. It would be better if there were an objective way to rate the alternative for that criterion, if possible. If it is not possible to have objective ratings, be as consistent as possible in your subjective rating.”
- Weighting: This means assigning importance or “weight” to the different criteria. So for example, depending on your situation or business you are going to decide that price is the most important part and, therefore, will have 50% of the weight.
- Ranking: This can be done with an excel spreadsheet, building in formulas that give points to each alternative based on the previous points.
I think this can be compared to a teacher’s job. So for example, you know that you need to evaluate the students on three topics (criteria), one of them being the most important one (weighting). In each assignment they get a grade (rating) and based on that you will get a final grade (ranking) which will determine who is the best student in the class (or in our case the best choice for our business).
* In this case, Dave is the best student.
Finally, we had the chance to use this method to identify which business model was the best for our specific assignment. We had to pick between Affiliate and Drop shipping model. Here is a short explanation of the two that my instructor posted:
- A “network” (e.g., Amazon) has products that they are selling from several merchants.
- You advertise specific products from the network (e.g., Amazon) on your Website.
- When a customer clicks to buy a product on your Web site, they are forwarded to the network (e.g., Amazon)
- The Network (e.g., Amazon) collects the payment, fulfills the order, and gives you a commission of the sale.
- You market the product, take the order, and collect the payment.
- You send the order to the drop shipper, who then fulfills the order (e.g., pulls it from inventory and sends it directly to the customer)
- You pay the drop shipper / supplier.
In my opinion, the best option was drop shipping, but the interesting part was to see how my classmates chose either the same option or the opposite using a lot of different criteria…I guess there is not just one way of doing business.