Supplier selection isn't simply about helping you source the right products at the right price at the right time. The right supplier will partner with you to develop an intimate knowledge of your current business needs in order to continually and proactively find opportunities to add more value.
Selecting a great supplier to be your business partner can be challenging. There's so much more to the cost of doing business with a supplier than the amount on a purchase order. Yet it's tempting to choose the supplier that offers the cheapest deal.
However, cheap does not necessarily equate to the best value for money. If the quality of your supplier's product or service is poor, you may face extra costs for returns and replacements, and risk losing business with any delays that result. If poor quality products or services are passed on to your customers, you risk damaging your business reputation, and, ultimately, lowering your profit margin.
Unreliability in a supplier can be a nightmare – shipments that arrive consistently late, stock that is incomplete, damaged or incorrect.
Issues can also arise if your supplier isn't cost-competitive, particularly if their competition is chasing you with lower and more attractive bids for comparable goods.
If you don't take the necessary time to provide your suppliers with all your requirements for now and the foreseeable future, and for your business to really understand your supplier and what they can do for you, then you're not in a position to evaluate whether they're the best supplier for you.
NAILING THE SUPPLIER SELECTION PROCESS
Look for suppliers who are capable of giving you more 'bang for your buck'.
Your ideal supplier should be one who works to develop an intimate knowledge of your business needs to continually and proactively find opportunities to add more value. They should have the flexibility to adjust their program to meet the changing needs of your business.
If you define your project in as much detail as possible at the outset, this will help suppliers understand the project and be able to develop tailored responses based on your needs.
Determine what is most important to your organisation before you begin discussions. This will lead to a more focused supplier response that supports your strategic initiatives.
Look for suppliers who are innovative, particularly in the areas of technology, and who use new products, new ideas, or new processes that enable a function to be performed in less time or at a lower cost.
Any improvement that makes doing business with each other easier. You want a proactive and engaged partner.
Choose suppliers whose strategic goals match your own. If being technologically advanced or customer-focused is important to you, a supplier with the same goals is more likely to have the know-how to help you achieve yours.
If you have ethical and environmental standings you are working to uphold, choose suppliers who reflect these values in the way they operate their own businesses.
A supplier that has a local dedicated sales team can provide a highly customised and reliable service when you need it is an important choice. Local proximity allows a supplier to really get to know your company.
DEVELOPING A STRONG SUPPLIER RELATIONSHIP
Work as hard on building a good supplier relationship as you do building a relationship with your customers and you will reap the many benefits. Competitive gains can manifest themselves in a wide range of areas, from better prices and delivery times to increased opportunities to consider and implement innovative practices.
Many suppliers will go beyond the products they provide by offering value-added services, such as account management, marketing, training, and customer service. Seek out these suppliers and use them as an extension to your own organisation.
Constant reevaluation is necessary for improvement, and a good supplier will continuously look for ways to improve and enhance your program. Such a vendor will be extremely active in strategic planning sessions and will make actionable improvement recommendations.
Finally, it's not prudent to rely on one supplier. You should have back-up suppliers on hand, particularly for your key products and services, in case your preferred supplier can't continue to supply for any reason. This can seriously impact your business, so best practice is to keep a second or multiple suppliers on hand. If you ever plan on raising money, lenders are likely to ask you if this is the case.
