How to Make the Best Supplier Selection for your Company

That special moment has arrived…

Yes, it’s time to pick a new supper.

Perhaps you’ve reached that stage in product development where you need more specific materials, maybe your business is growing and there’s a spike in demand levels.

Whatever the reason that drives you to assess a potential supplier for your company, there’s a fundamental question that you must bear in mind. 

How can you select the supplier that best matches your company’s requirements?

‍

What’s Supplier Selection?

You can understand supplier selection as that combination of steps that begins with finding a supplier that aligns with your requirements, continues with assessing their viability, and if everything is fine, signing a contract at the end. 

This process plays a fundamental role in helping your company to keep operations running without problems as well as making sure that your customers receive high-quality products on time.  Working with a structured approach to select your suppliers also contributes to achieving your business’s goals by aligning your supply chain with your priorities.

Still not convinced?

‍

Why Supplier Selection is Important?

Aside from the obvious reason being your company’s necessity for working with suppliers, there’s a list of points that highlight the importance of having a strategy to find the right supplier. 

• Cost efficient: Think about it, if you don’t carry out the process of finding a supplier for your company as you should considering all the critical factors that are relevant to you, how much money would you lose? How much time would you’ve wasted working with a supplier that’s not aligned with your expectations?
• Keep quality levels in check: And speaking about expectations, isn’t quality one of your procurement’s main goals? This is why sometimes rushing to decide on a potential supplier isn’t a great idea. Take as much time as you need to fully understand the conditions of service.
• Build resilience: If we were to choose a keyword for the future of supply chains, it'd be resilience. As market conditions change and our world in general is surrounded by challenges, business leaders like you need to find ways to protect their supply chain from risks and disruptions. Working with a solid and diverse supplier network is usually the first and most important step. 

‍

The Supplier Selection Process 

Phase 1: Assess your requirements.

Why do you need to find a new supplier? What internal requirements are you expecting to meet? 

Start the process with these sorts of questions to understand your company's needs. Be as specific as possible, define what materials products, or services are required, and go into detail about what's crucial for your company. For example, you could set criteria regarding quality or sustainable practices.

Remember to align your procurement goals with your business's general objectives so there's not a mismatch between what you purchase and what you want to achieve. 

‍

Phase 2: Identify potential suppliers.

The most exciting part of the process and the one where you'll have to pay close attention.  

You can choose where and how you perform your research but in terms of general recommendations this is how you should proceed: 

• Make a list: You can ask the most organized people in the world how they keep things clear when trying to make a decision and there's a high chance that a list will be involved in their answer. Create a list with your findings, write down your requirements, and see how those potential suppliers align with your needs.
• Check the competition: Especially for small businesses and start-ups that are only starting it's a good plan to see what's going around within your industry so you can discover who are the key suppliers everyone is talking about. 
• It's not only about costs: We get it, finding a good price is great, but a successful procurement strategy isn't measured solely on cheap prices. Think first about the quality of what you're buying, how do you see this partnership running in the long term? What about their adherence to regulations?

‍

Phase 3: Establish your criteria 

Yes, costs aren't everything so your criteria should reflect this, including values like quality, reliability, flexibility, and financial stability. 

Rank these criteria based on what matters for your company's goals. Other factors you should consider are geographic proximity, technological capabilities, and eco-friendly practices.

‍

Phase 4: Evaluate proposals.

At this point you've found those suppliers that meet your criteria the best, they've sent you their proposals and it's time to assess them. Compare each one based on your requirements so you can make the best decision for your company. Ask for case studies if possible and pay attention to their previous clients. How was the experience? 

To build transparency, you could use a scoring system so the results aren't biased by perceptions. 

‍

Phase 5: Risk assessment 

Consider this step as the last one before making a final decision. Assess all the potential risks associated with your potential picks. You can rely on predictive analysis to determine their financial stability and the impact of external factors like economic conditions or geopolitical conflicts. 

Evaluate how the supplier you'd choose would deal with the kind of problems that could disrupt your operations.

Another point worth mentioning is the importance of cybersecurity measures. Especially if your supplier is going to have access to sensitive data. 

‍

Phase 6: Negotiation 

Good news, you found a match.

Now what?

Set the conditions that are going to build your partnership.

You'll want to negotiate terms that are beneficial to both of you. Focus on payment terms, delivery schedules, performance metrics, and compliance. 

This is your chance to be open regarding your expectations so there aren't misunderstandings once you start working together.

‍

Phase 7: Finalizing agreements.

Now that the negotiation is over, you can proceed to sign a contract that ideally would contain all the relevant details. Include performance metrics and review schedules so there's a sense of accountability and continuous improvement. 

Remember that the best way to know if something is wrong begins with carrying out internal and external analysis. 

‍

Best Practices for Supplier Selection 

Evaluate reliability and financial health. 

Stay with suppliers that can prove a track record of reliability and high quality. Don't forget to assess their financial health so there aren't surprises in the future. Market reputation is equally important. 

‍

Value innovation 

So you are a business that has its sights on growing and innovative products? 

Work with suppliers that have advanced digital abilities and are big cheerleaders of innovative practices. Flexibility usually goes hand-in-hand with these suppliers, something that can be advantageous for your company as you keep evolving. 

‍

Ethical sourcing 

As the world becomes more conscious and customers actively seek ways to heal the planet and our society, the last thing you can do is choose a supplier with no ethical compass whatsoever. 

Ethical sourcing includes fair labor practices, environmental impact, and respect for industry standards.

‍