When it comes to choosing suppliers, procurement departments rely on a number of qualitative, quantitative, subjective and objective criteria. Since 1991, Weber & Al. have identified three main criteria: price, delivery and quality. However, what other factors do today's procurement departments take into account when choosing suppliers, alongside these essential criteria? Procurious, a network created by and for procurement and supply chain professionals, was particularly interested in this topic, and asked procurement decision-makers about it directly. Two key factors were highlighted during the interviews: commitment and cultural fit.
Factor no.1 for procurement departments: Commitment
Commitment is a factor that can really make a supplier stand out. This involves being a valuable partner who understands, shares and works to overcome any challenges that their customer might be experiencing.
Chris Cliffe, Director of CJC Procurement, explains this clearly: "For me, the most important thing is relationship fit and you measure that through kind of the intangibles but ultimately, is that supplier engaged in the outcomes that you need from that procurement project and from that contract? If they're engaged in delivering with you and achieving that outcome, that sets them apart from those that are just trying to sell you stuff".
Factor no.2 for procurement departments: Cultural fit
Cultural fit means that each entity aligns themselves with the other company's business culture and shares certain values. This makes it easier for them to understand each other and therefore work better together.
Lucy Bunting, Head of Procurement instantly said, "Cultural fit and partnership, and my reasoning behind that is again, I've seen some phenomenal suppliers out there that are incredibly innovative. But actually, if the business is not in a position where they're happy to take on board that risk, it's never going to work".
Gemma Bell, Head of Purchasing at L'Oréal, added: "I would say that there are lines to your organisation's culture, values and fit so that you're working with an organisation where you can build a long-term partnership".
Finally, the idea of a relationship hides behind these two factors. As identified in management consulting firm Bain&Company's pyramid of values, aimed at procurement departments,companies see these relationship factors as a way to optimise the business relationship. Commitment and cultural fit boost confidence and aid understanding, respectively, ensuring that there is a solid base on which to build a partnership.
FAQs
5 key criteria for evaluating your suppliers. In any supplier evaluation, whether of a new or existing supplier, it's important to measure the company's production capacity, performance, risks, quality and environmental impact.
How do you select suppliers in procurement? ›
Here are 5 stages of an effective supplier selection process:
- Stage 1: Identify Business Needs. ...
- Stage 2: List Potential Suppliers. ...
- Stage 3: Determine your Supplier Selection Criteria. ...
- Stage 4: Meet the Suppliers. ...
- Stage 5: Draft, Negotiate, and Sign the Contract. ...
- Establish a Standard. ...
- Keep Communications Open. ...
- Pay on Time.
The 6 most important factors to consider when selecting a supplier for your project
- Do the supplier's goals align with your own? ...
- Is the supplier experienced? ...
- Does the supplier claim to be flexible? ...
- What type of product or service quality does a supplier provide? ...
- Will the supplier bring value to the project?
5 key criteria for evaluating your suppliers. In any supplier evaluation, whether of a new or existing supplier, it's important to measure the company's production capacity, performance, risks, quality and environmental impact.
What are the three factors affecting the choice of suppliers? ›
Factors influencing choice of supplier
- Price. The price of supplies will have a direct effect on how much it costs the company to produce a product. ...
- Location and transport costs. If a supplier is located near to your company the transport and delivery costs will be lower. ...
- Lead time. ...
- Product quality. ...
- Reliability. ...
- Reputation.
The 7 Steps in the Supplier Selection Process
- Identify Organization's Needs. ...
- Establish Criteria for Evaluation. ...
- Screen Suppliers. ...
- Ask for Requests for Proposal (RFPs) ...
- Evaluate and Select Suppliers. ...
- Audit Supplier Sites. ...
- Finalize the Supplier Agreement and Relationship Management.
supplier evaluation, supplier development, negotiations, and contracting OD.
What is the first step in selecting a supplier? ›
Clearly defining your organization's requirements is the first step in the supplier selection process. This entails identifying the precise goods or services required, as well as the quality requirements, deadlines for delivery, expected prices, and any other factors that are crucial for your company.
What are the four main factors in purchasing and supply decisions? ›
As can be seen in Table 2.1, an effective purchasing framework includes four important decision areas: (1) supply management, (2) buying, (3) supplier development, and (4) the scope of manufacturing.
How do I choose the right vendor? ›
Vendor Selection Criteria
- Quality product or service, meeting any technical specifications.
- Value with reasonable cost and terms.
- Transportation costs.
- Discounts for volume and early payment.
- On-time delivery.
- Financial strength.
- Excellent customer references.
- Customer service.
To create a network that is strong, reliable, and aligned with your business objectives; utilize this 5 step process:
- Create supplier selection scorecard.
- Identify suitable suppliers.
- Rank the scorecard.
- Negotiate.
- Create contract.
Supplier appraisal describes all those activities undertaken to evaluate a potential source of supply. The criteria considered will depend upon the nature of the acquisition, but most evaluations explore technical capability, capacity, quality of service and financial health.
Why is it important to choose the right supplier? ›
Choosing the right supplier can make or break your business. A bad supplier can reduce your sales revenues and margins, damage customer relations, reduce the quality of your products and services, disrupt operations and increase costs.
How do you identify potential suppliers? ›
To summarize: Finding Potential Suppliers: Look in industry associations, trade shows, and online directories. Network with industry contacts and use social media. Consider supplier sourcing services for a streamlined approach. Evaluating Potential Suppliers: Assess quality, reliability, and price.
What is a reputable supplier? ›
A good supplier ensures you can deliver the same quality of products and services every time, so customers have a consistent experience and stay loyal to your business. A reliable supplier reduces delivery delays or the chances of receiving substandard products.
What is the process of selecting suppliers called? ›
Sourcing is an early stage of the procurement cycle. It encompasses activities such as identifying and assessing potential suppliers of goods or services, negotiating terms and selecting the vendors that best meet the company's needs.
How do you identify suppliers for sourcing? ›
Checklist: What should I be looking for in a supplier?
- Price. Pretty obvious this one isn't it? ...
- Quality. Your supplier might quote you a fantastically low price, but you need to make sure the quality's right. ...
- Minimum order quantity. ...
- Delivery time. ...
- Payment terms. ...
- Financial stability. ...
- Capacity. ...
- Customer service.
The steps are: recognize a supplier selection need, identify supply requirements, determine a supply strategy, identify potential suppliers, reduce the number of suppliers in the selection pool, conduct a formal evaluation, and select a supplier and reach agreement.
