Introduction:
In today’s highly competitive market, selecting and evaluating suppliers effectively is crucial for maintaining a robust and efficient supply chain. High-quality, reliable, and cost-effective raw materials and services are essential for delivering superior products and services. To achieve this, organizations must adopt best practices in supplier selection and evaluation. By carefully assessing potential suppliers and fostering strong partnerships, businesses can ensure they meet their operational needs and strategic goals.
Supplier Evaluation and Selection Matter
Historically, supply chain optimisation focused on pricing.
Due to advanced digital data management technologies and digital transformation, suppliers are being seen as significant partners in shared success rather than just vendors.
Today, vendors share data, integrate systems, and collaborate with procurement specialists to identify product development and innovation opportunities, take advantage of cost-cutting measures, and expand market share or competitive advantage for both partners.
Your procurement team may evaluate each possible supplier in a comprehensive and transparent manner with good supplier relationship management.
Of course, not all vendors will be important suppliers or partners in product development.
You won’t build long-term relationships with every supply chain provider.
Data-driven supply chain management and process optimisation technologies make it simpler to choose suppliers who satisfy your high requirements for product quality, lead time, and relevance to your core capabilities.
Making supplier relationship management the focus of your supply chain management and employing the correct technologies allows you to leverage qualitative and quantitative indicators to:
- Keep product quality good, lead times minimal, and supplier performance and compliance acceptable.
- Sustainability and ongoing improvement should be considered in sourcing and supply.
- Contingency-based sourcing protects company continuity against interruptions.
- Risk management is simplified by prompt corrective steps to prevent problems from becoming disasters.
- Limit supply chain bloat while permitting speedy supplier evaluation and addition.
- Setting supplier assessment criteria also improves your negotiating position.
A provider that excels in most areas but lacks in others may offer better terms or price to get your business.
You may then use those savings to construct a supply chain contingency plan to address the supplier’s vulnerability and minimise unnecessary risk while still increasing earnings, competitive advantage, etc.
Reliable suppliers deliver on schedule, at the right price, and with the correct quality. To ensure business continuity, reputation, and compliance, they have contingency plans and are ready to get the job done without passing the buck or risk to you.
Workings of Supplier Selection
Effective supplier selection is needed to build a trustworthy, flexible, and resilient supply chain. Most selection procedures use scorecards to rate candidates.
Your supply chain optimisation plan may involve two supplier assessment and selection processes: one for existing vendors and one for new suppliers.
The former is used to improve supplier relationships (better terms and service, discounts, a partnership role) or “trim the fat” and eliminate or rehabilitate unreliable, expensive, or inappropriate suppliers.
Both procedures require documented supplier performance and compliance criteria.
Each follows a basic three-step process:
Find Potential Suppliers
Collect and record each candidate’s scorecard for your criteria for hiring new suppliers. Reviews of current vendors are the same but contain extra factors depending on their performance with your organisation.
Although a firm creating its supply chain will typically rely on reputation and referrals, a company streamlining its current supply chain will have its own supplier compliance and performance data to score prospects for retention, modification, or removal.
Assessing Suppliers
After choosing your top prospects, rate them using your criteria. At this stage, you might choose a few favourites and negotiate their advancement.
Similar steps are used to optimise current supply networks. Instead of a list of candidates to be added to the system, you may create numerous lists of applicants to elevate to a partnership role, negotiate better price or conditions, or replace with superior possibilities.
Selecting Suppliers
The final supplier selection involves contract talks with the winner(s) to become your supply chain vendor. This time will be utilised to change, improve, or cancel your supply chain partnerships as needed.
No matter your method, having a centralised, cloud-based data management system like Planergy at the core of your procurement business makes supplier evaluation and selection easier.
You can gather, organise, and analyse the data you need to make smart and strategic sourcing decisions with powerful process automation, analytics, and artificial intelligence, as well as seamless interaction with your existing software environment.
Supplier Qualities to Consider
Every company’s supply chain optimisation and supplier relationship management strategy is different.
varied industries have varied material demands, goals, and competitive paradigms.
However, “good suppliers” share a set of features you may look for when assessing your current suppliers and any new ones you may be contemplating.
Reliability
Price used to rule the vendor world, but even the biggest savings are useless if you can’t access the raw materials and services you need when you need them or assure your goods’ quality and cost. Reliable suppliers deliver on schedule, at the right price, and with the correct quality. They also have strategies to preserve their company continuity, reputation, and compliance; they’re ready to get the job done without passing the buck or risk to you.
Stability
New suppliers deserve their chance, and most supply chains can accommodate non-critical goods and services. However, your essential suppliers should have a good track record, reputation, and recommendations to support their pricing and conditions.
Location
Company savings can be enormous by outsourcing raw materials, commodities, and services to remote suppliers in a global market. More kilometres between your organisation and its suppliers increases the risk of supply chain interruptions, delays, and unexpected costs. If you need something urgent, you may have to pay a premium from faraway suppliers—if you can obtain it.
Core skills
Competing in a data-driven, digital world requires speed, precision, and understanding. If you wait for your vendors to catch up, you may be left behind. Suppliers are appealing:
Highly skilled professionals ready to collaborate with your procurement team to suit your needs.
Knowing the latest technologies and connecting their systems to yours to better data collecting, administration, and analysis.
High quality, competitive price (and financing, if applicable), and a proactive, positive approach towards working with you as a client and prospective partner in success.
Price
Most supply chain and supplier relationship management approaches no longer prioritise cost reductions and lowest pricing. Instead, firms are prioritising cost avoidance and cost reductions to make procurement a value centre. Price remains a key issue and a bargaining point. Remember that the complete cost of every purchase—including possible savings and value provided by excellent relationships, supplier quality, and strategic decision making—determines your return on investment, not price.
Additional Criteria: Ray Carter’s 10 Cs of Supplier Evaluation
As you choose your most essential supplier selection and assessment criteria, Dr. Ray Carter’s 10 Cs of Supplier assessment may be helpful.
These supplier selection criteria, developed by DPSS Consultants director Dr. Ray Carter in 1995 and published in the Journal of Purchasing and Supply Management, include:
Competency
How successfully does the provider satisfy consumer expectations and obligations? How is it regarded by similar businesses?
Capacity
Can the supplier match your company’s quality, lead time, and pricing standards? What is their materials management system? Do they have the resources to fix business disruptions?
Commitment
How does the supplier show its dedication to quality, performance, value, and excellence? Does it fulfil industry vital certifications and standards? Does the provider have a reputation for exceeding client expectations?
Control
What internal controls does the organisation apply in policies, procedures, and supply chain? How do they balance risk, quality, and client expectations independent of external factors? Does the supplier follow ISO9001, GDPR, or Sarbanes-Oxley?
Cash
The supplier’s cash flow profile? Does their working capital cover their commitments and provide room for innovation, expansion, and unforeseen expenses? How can they prove consistent financial health?
Cost
How do the supplier’s prices and overall cost of doing business compare to competitors?
Consistency
Is the provider known for quality and service? What processes assure consistency? Will they offer samples or demonstrations?
Culture
Does the supplier’s company culture match yours? Do they share your company’s values?
Clean
Does the supplier meet your sustainability and environmental standards? Is their firm known for being green? Are they known for ethical business practices?
Communication
Is the firm transparent, devoted to communication and collaboration? What crisis communication plans does it have? Do you share their methods and technologies?
Conclusion:
Effective supplier selection and evaluation are pivotal for building a resilient and high-performing supply chain. By following best practices, including thorough assessment criteria and leveraging advanced technologies, companies can transform potential suppliers into valuable partners. Prioritizing key factors such as reliability, stability, and alignment with organizational values ensures a strong and efficient supply chain. By integrating these practices, businesses can enhance their procurement processes, reduce risks, and achieve sustainable success.
