Guide to choosing a supplier
It makes no difference what business you are in – choosing a supplier or vendor that is right for you plays a key role in your company’s success.
You know you’ve found a good supplier when the quality of the items you receive match the description in the catalogue and is acceptable to your target market, the supplier delivers on time, and the products are in perfect condition.
Having some basic evaluation criteria in place for choosing a supplier, and encouraging effective communication and transparency is essential to the smooth operation and profitability of your company.
Considerations in choosing a supplier
The first step we recommend you take is to establish the key parameters that are critical to your product or service’s supply. The four most basic considerations are:
Each of these considerations are discussed in more detail below.
Competitive pricing is an important factor. However, it is essential to not only focus on obtaining low prices, but to emphasise service quality too (ensure that there isn’t a trade-off between cost and service quality). Your goal is to understand what value-add the supplier will bring to your company.
Make sure to find out the following quality-related details about your potential supplier:
- Process control methods used
- Whether the company is ISO 9000 registered (the ISO system is a quality management system which ensures the creation of quality, consistent products by means of providing specific steps and processes to follow)
- Approaches to problem solving and preventative maintenance. If a company is doing preventative maintenance, there will be records that you may have to look at. When machinery is down, it could cost a company a large sum of money daily. Good companies will monitor their machines religiously.
- Cleanliness and housekeeping. If possible, conduct an informal inspection of your supplier’s factory or work space. If it is messy and dirty, that is an indicator of the kind of service and product you are going to receive.
Ensure that working with the supplier will not become more difficult as your company grows. It is important to share your own numbers and forecast with them. Suppliers with extensive knowledge of market conditions and contemporary issues impacting your business can be very valuable in helping small companies find a way to sustained financial success. Find out from other customers whether the supplier takes extra measures to satisfy their customers, for example after-hours accessibility, training or inventory support.
The first step in determining reliability is basic desktop research. Also make sure to seek out customer references. Look for available press releases of the particular supplier, and ensure that the supplier maintains a policy of open communication.
Other categories, or sub-categories, can be added to your list of considerations, but at the very minimum you should include the four above mentioned categories. Think about these considerations very objectively. It would be wise to write down your parameters without thinking of any specific supplier, so that you can keep your thinking broad.
A very easy and effective way to rate your supplier is by using a weighted point method. This method helps you to objectively evaluate each supplier before choosing a supplier. Figure 2 below provides an example of this method by comparing two suppliers.
Establishing long-term relationships with suppliers is a key to successful business. With this in mind, it is important to always do your homework before choosing a supplier. The more time is spent upfront evaluating the supplier, the less likely you will have to spend time fixing (potentially costly) mistakes later.
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