Supplier Selection Process – Strategic Decision Making

September 18, 2017

The supplier selection process entails a wide range of activities beyond scanning the price lists and skimming through catalogs of the potential vendors. Factors such as feasibility, quality, reliability, and service impact the supplier selection process. Organizations often make use of market intelligence and other business intelligence tools to gain valuable insights that help them in strategic decision-making and help them achieve their business objectives. Such insights allow businesses to strategically approach its supplier selection process and understand the demands of their potential customers. The supply chain professionals suggest a step-by-step approach to the supplier selection process – know what you want, enlist your alternatives, and choose the right vendor for your business.


Supplier Selection Process – Qualities of a Supplier

Organizations look for suppliers who offer unmatched product and service quality, ensure timely delivery, and quote competitive prices. Why is it so important to carefully select the suppliers, you ask? It is because customers will associate the quality of the product with the brand and not the suppliers. While selecting a supplier, businesses must evaluate the alternatives on various parameters such as reliability, quality, value for money, financial security, and service among others. Supply chain professionals must bear in mind that low price doesn’t always translate into high quality and reliability and should be able to strike a balance between various factors based on the business objectives and market strategy.

Identifying The Right Supplier – Swipe Right

Selecting the right supplier is not as easy as swiping right, businesses must keep in mind two things: first, the suppliers must have strong service and clear communication skills to understand your needs and serve you better. Secondly, the vendors must be financially stable; a strong cash flow will ensure timely delivery, better quality, and long-term business association with them. At the start of the supplier selection process, it is essential for the organization to consult various sources such as directories, business advisors, references, trade associations, and industry-specific journals to draw up an alternative list. Once the list is in place, the procurement manager can draw up a pro-con list by answering a few questions to shortlist them,

  • Does the supplier have the capability to meet your requirements on time?
  • Are they financially stable?
  • For how long have they been in the business? Do they have a strong client base?
  • Do they have sufficient credibility in the industry?

Before zeroing down on the supplier(s), organizations must be sure of their objectives and goals, carry out a thorough research and leverage market intelligence insights, understand the differences between strategic and non-strategic suppliers, evaluate their supply chain processes, conduct a credit check on the potential suppliers, determine the service level agreements (SLAs), and not be dependent on a single supplier.

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