Suppliers are the lifeblood of any supply chain. They can determine a company’s profitability and its ability to deliver quality products and services.
That’s why all businesses should have a comprehensive supplier selection process in place. Going beyond just choosing based on price, it considers every aspect of a vendor and their offerings. Hence, you’ll have a higher chance of making the right decision every time.
This article will discuss how to set up a vendor selection process, including the vital criteria to help you identify the best suppliers for your business.
What is the Supplier Selection Process?
A supplier selection process is an established procedure used to objectively evaluate different suppliers to find the best fit for a company. It’s one, albeit important, part of a company’s supply chain system.
The entire supplier evaluation procedure itself is a multi-step process that starts with having the proper guidelines to help you during vendor selection. To achieve this, you need to establish your sourcing strategy.
How to Create a Supplier Selection and Evaluation Strategy
Your sourcing strategy is an essential item in your vendor selection checklist because it tells you which one you need based on your business’s objectives and issues.
For example, let’s say your main competitive advantage is that you can guarantee your products are always available to your customers. To maintain that advantage, you might prioritize delivery times over cost in your vendor evaluation criteria.
Contrast this to if your company offers the lowest-priced product in the marketplace. In that case, you’d want the cheapest vendor possible. Knowing your business needs allows you to be more selective with your vendor choices, saving you time and effort when searching.
What You Should Look for in a Supplier
Depending on your sourcing strategy, your selection criteria for vendors might look different from another company’s. But there will always be common characteristics every supplier should have, such as:
- Reliability
The reliability of your products and services will significantly depend on how reliable your vendors are, so this is a critical aspect to consider.
- Quality
While the quality of a vendor’s offering is essential, it’s also worthwhile to look at their consistency. It all ties back to reliability – you must be sure that they can deliver products at the same level of quality every time.
- Value for Money
Even if you’re scouting for vendors with the lowest prices, it’s still best to check if the price is worth it. If it means getting an inferior product or slower service, it might be better to go for a more expensive but reliable supplier.
- Stability
It’s in your best interest that your supplier stays in business to prevent disruptions to your operation. Do your homework and check each vendor’s financial health and stability before doing business with them long-term.
- Level of Communication and Partnership
Communication is vital, especially when problems arise. Make sure the supplier gives you enough feedback during these times. The best suppliers also take the initiative to talk to you regularly in order to determine ways to serve you better.
How to Identify Potential Suppliers
Once you have your supplier selection criteria, you can now start identifying vendors that fit the bill.
There are many places you can scout for vendors:
- Current and past vendors
It’s best to start with suppliers you’ve already worked with because you already have a relationship baseline with them.
- Referrals
Recommendations from trusted sources like friends, colleagues, and other companies are a safe way to source vendors because they’ve already pre-vetted these suppliers.
- Competitors
In some cases, it might make business sense to source from your competitors. Alternatively, you can tap into their vendors if you have that knowledge.
- Public search
This should be the last resort after you’ve exhausted your network for recommendations. You can try searching the Internet, industry groups, or directories for potential vendors.
Create a Shortlist of Suppliers
Every time you encounter a potential supplier, you’ll want to evaluate them against your vendor selection criteria. You’ll eventually come up with a shortlist of candidates.
To further narrow down this list, it’s helpful to have a scorecard. This is where you assign a score for each suppliers’ selection criteria. You might need to gather more information from each supplier to assist with your decision through proposals, interviews, or site visits.
Once you’ve scored each candidate, rank them from highest to lowest. You can then consider the top three for your final selection.
Choose a Supplier
The last step is to negotiate and discuss further with your top supplier candidates. This is the chance for your company and the supplier to arrive at a deal that favors both parties. From there, it’s a matter of picking the supplier with the most favorable agreement. To seal the deal, you either need to sign a contract or make a first purchase order.
Get the Right Supplier for Your Business
Get the Right Supplier for Your BusinessPicking the right supplier for your business takes sound judgment, discernment, and negotiation. It can be a complex and lengthy process, but it can be much easier with the right tools.
CBX Software Solutions offer a sourcing and supply chain management platform that streamlines the supplier selection process and relationship management for your business. Contact us today for more information or to schedule a free demo.