6 critical areas to consider when choosing a supplier
Choosing a supplier is a lot like buying a used car. Sure, you can go to a dealership, point to the color or the model you like, and say you’ll take it, but you wouldn’t buy a car this way, would you? You don’t know how many miles are on the vehicle, if it has the features you want or even the price. The risks associated with this type of purchase are great, and the potential for problems is high.
The same thing applies when choosing a vendor or supplier for your business. You need to do your homework first. Just like that car, selection takes time and should require an analysis of critical performance criteria, driven by quality and reliability standards, as well as an understanding of material cost and availability. The process should be followed with care to ensure an overall fit with a company’s core values, the value the external provider’s products bring to the organization, and ultimately their dedication to customer satisfaction.
Building a company’s supplier base is similar to finding the right car dealership. You must source and identify, qualify, get to know one another, and build a relationship that will scale with you. Below are six critical areas to consider when choosing a supplier.
Identification
The sourcing and identification process can be long and complex. The first step is creating an outline of the ideal vendor partner. Depending on material requirements, sourcing often requires research to find competitive bidders and develop a list of potential external partners. This process is achieved by utilizing online tools, interaction with vendor representatives, and creating requests for quotes.
Qualification
The qualification process is the most important element for vendor selection. The first step here is to create a list of supplier qualification criteria critical to your business and production process. This criterion should include a capability assessment describing internal controls and process management, a robust quality management system and certifications, company operations, an on-site audit, and the supplier’s financial position. Third-party service firms, supplier rating websites, and other software can report on criteria to help you filter your list of qualified partners to consider.
Reliability
Delivery of products is critical to new vendor consideration and can often be taken for granted. Supply chain requirements have become more integrated into production scheduling and program management, and any performance breakdown can be catastrophic to the promise of timely delivery.
Reliability is key to scheduling, project management, costs, client satisfaction and is necessary to maintain competitive turnaround times on custom system orders. A strong on-time track record can set a supplier apart. Similarly, delivery issues can be a disqualifying factor when choosing between competitive vendor proposals.
Stability
The new vendor selection process also depends on supplier competency and stability. Understanding a supplier’s infrastructure is vitally important when assessing a new vendor partner. Not only should the company have the capacity to fulfill an order, but it needs to stand behind a product throughout its warranty. Suppliers must understand a customer’s industry, desired quality standards, reliability, and delivery schedule. Creating metrics and key performance indicators applicable to the business allows you to rank supplier’s performance relative to the supply chain and assures that you will never be left high and dry.
As companies are held to higher quality standards by their customers, they must ensure the same level of performance and service from their suppliers. This can be a deciding factor in the formation and continuation of a business relationship. Take the time to evaluate a supplier’s quality management system and see how they address issues, prioritize orders, and rework nonconforming material
Financial Footing
It is equally important to assess a supplier’s financial position. Knowing in advance how your vendor partners deal with economic disruptions and other crisis events allows for preparation and contingency plans, which are vital to being resilient during declines in economic activities.
Transparency
The last stage in vendor selection is the competitive bid process, which ensures transparency, fairness, and equality of opportunity while reducing complacent tendencies in material sourcing.
Submitting a Request for Quote for commercial off-the-shelf products can show a lot about partner prospects, including how they evaluate the material costs, deal with supply chain questions, internal stock levels, and the value-added services provided by selected vendors.
A new vendor who is flexible and able to accommodate a dynamic scheduling environment, communicating any constraints to meeting a schedule, will become a value-added service provider helping a manufacturer reduce costs and lead times and ultimately increase their throughput.
Ultimately, the success of a procurement team depends on the success of the supplier base. It is as important to develop new partners as it is to continue the strong relationships with long-term suppliers, always being guided by our core values, including trust, integrity and teamwork.
Miltec UV strives to achieve the most favorable balance of quality, service, performance, and cost in the supplier selection process – the same set of criteria our customers expect from us. Download our Infographic to learn more about Miltec and the Four Benefits of a Reliable, Stocking Supplier.
Updated from 6.10.20
