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 matches 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:
- Cost
- Quality
- Service
- Reliability
Figure 1: Four considerations when evaluating a supplier.
Each of these considerations is discussed in more detail below.
Cost
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.
Quality
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 that 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 workspace. If it is messy and dirty, that is an indicator of the kind of service and product you are going to receive.
Service
Ensure that working with the supplier will not become more difficult as your company grows. It is important to share your own numbers and forecasts 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 sustain 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.
Reliability
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.
Comparing suppliers
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.
Figure 1: Four considerations when evaluating a supplier.
Establishing long-term relationships with suppliers is a key to a 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.
Need assistance with other import and export related queries? Contact us on 087 550 1038, or fill out the contact form on our website and one of our consultants will be in touch.
