Supply chain management encompasses an extensive range of tasks, systems, and processes that come together to facilitate the optimum flow of materials, goods, and services from the source to the end consumer.
Despite the technological advancements of the past decades which have brought automation and digitalization to the table, ensuring the efficiency and smooth functioning of supply chains has become more difficult than ever due to their increasing complexity and the ongoing transformations taking place across all sectors and markets.
This is especially true in the manufacturing industry where companies have to deal with intense competition and constant disruptions caused by factors like changes in policies and regulations, political instability, sustainability pressures, shifting consumer behavior and global trade flow, shortage of raw materials, and so on.
Selecting suppliers for smooth supply chains
While manufacturers focus on different elements and employ diverse approaches to address the numerous challenges they face and build a resilient and strong supply chain, there’s one area in particular that plays a key role in this regard and therefore requires special attention, namely supplier selection.
Partnering up with the right vendors and organizations can make a huge difference to your company’s performance by helping you reduce costs, ensure timely delivery of products/services, and uphold a consistent level of quality, ultimately leading to improved customer satisfaction and higher profitability.
So, if you’re looking for ways to give your supply chain a boost, it’s a good idea to start with perfecting your supplier selection process, and we’re here to walk you through some of the most important steps you need to follow.
Identify potential suppliers
In today’s globalized economy, there’s no shortage of suppliers to choose from, regardless of industry or niche. However, since they won’t come knocking at your door to offer their services, it’s up to you to spread your antennae far and wide and look for potential suppliers, which might be a bit daunting if you don’t know where to start.
While getting in touch with reputable providers might seem like the simplest option, it can also come with higher costs, so it’s best to have a broader approach and use multiple sources to expand your search, such as:
- Supplier databases – online resources like ThomasNet, Global Sources, and Alibaba provide a great starting point, allowing you to search for suppliers based on specific criteria.
- Referrals – tap into your network and get in touch with other companies in your niche that can provide reliable supplier recommendations.
- Industry associations – trade publications and journals offer up-to-date information on available suppliers that can facilitate your search.
- Procurement consultants – if you have special requirements, working with a sourcing and procurement professional can make it easier for you to find the right suppliers.
Narrow down your options
Assuming you’ve ended up with a long list of potential suppliers, the next step is to sift through all the available options and select only the vendors and contractors that are a good fit for your company.
Identify your company’s requirements
To run a proper selection process and make the right choice, you first need to get clear on your company’s specific requirements and figure out what you need from your suppliers and the type of relationship you’re looking to establish with them.
This can be done by engaging with team members who occupy key positions in the company, conducting needs analysis, and evaluating the efficiency of your supply chain management.
Should you join forces with a local supplier or would it be best to opt for international providers? Would your company benefit more by working with an established contractor or would a startup suit your needs better? These are some of the questions you should ask yourself before moving forward with your supplier selection process.
Determine your evaluation criteria
Based on the business needs and requirements you’ve identified, you need to develop a set of criteria that will help you conduct an objective selection process. While standards vary from one company to another, there’s a series of factors that all enterprises must take into consideration when evaluating suppliers, as follows:
- Price – you need to make sure that the costs incurred by suppliers for their services/products fit into your budget to avoid financial hurdles along the way. Comparing supplier prices against each other should help you find the best value-for-money option.
- Quality – if you want to ensure the success of your supply chain, it’s crucial to stick to suppliers with a solid quality management system in place, preferably based on the ISO 9001 standard, especially if your own company follows the principles set out by ISO. To this extent, you might want to ensure adequate ISO training for designated employees involved in the selection process, so they can accurately assess suppliers’ adherence to industry standards.
- Capabilities – you have to measure suppliers’ capabilities against your company’s requirements to ensure they are a good match for you. This involves evaluating their production capacity, the technologies they employ, and their ability to meet your current demands and deliver the necessary products/services on time and according to the terms established in the contract.
- Financial stability – the financial strengths of your key suppliers will have a direct impact on your own financial health. Therefore, you should make it a priority to inquire about their financial situation and discuss aspects such as payments, liquidity, and risk management before you enter a partnership.
- Communication and collaboration – effective collaboration and communication are the pillars of building strong relationships with suppliers. You need to pay attention to the channels suppliers use for communication, how promptly they respond to inquiries, and their overall approach to dealing with partners.
Assess and decide
The evaluation criteria you’ve established should help you separate the wheat from the chaff and create a shortlist of potential suppliers. Obviously, this implies a lot more than looking at a list of requirements and deciding which suppliers fit the bill.
You’ll have to do in-depth research on each provider, weighing up their pros and cons and taking into account your company’s priorities and objectives while doing so.
The next step implies sending out a Request for Proposal (RFP) or a Request for Quotation (RFQ) to those who have made the cut and then carefully reviewing each bid submission. Hopefully, this should help you select a winner or winners and mark the beginning of a fruitful collaboration that will lead to supply chain optimization.
Supplier Selection article and permission to publish here provided by Mary Hall. Originally written for Supply Chain Game Changer and published on April 23, 2024.
Cover image provided by vecteezy.com.