Tips for Selecting Suppliers
Whether you are setting up a new business or run an existing one, it is important you take your time when selecting your suppliers. This will help you prevent future misunderstandings and difficulties. Below is a simple, step-by-step process you can use in your supplier selection.
Step 1. List your candidates
Create a list of suppliers that could work with your business. It's important to have this list as a source of backups in case something should happen to your preferred candidates.
Step 2. First screening - legitimacy and financial soundness
In order to identify, shortlist and screen prospective suppliers you need to profile each one. Contact all companies on your list through mail, fax or email and clearly state your business proposal and objectives, as well as the procedure you use in supplier selection. For those that express interest in your offer you have to determine their legitimacy and financial soundness. You can do this by requesting credit reports from credit rating agencies and checking whether they are a member of any associations or industry group.
Step 3. Second screening - past performance
After eliminating those who didn't pass the first screening you will have to determine how the remaining candidates' performance compares with the average industry performance. Contact customers of your prospective supplier and ask them for a rating on performance factors, including timeliness, problem solving, product quality, costs, technical support and attitude.
Calculate an overall satisfaction rating from your results and rank your prospects to create a list of preferred suppliers.
Step 4. Third screening - match your goals
Before making contact with a preferred supplier you should make sure their way of doing business matches with your goals. Get answers to the following questions (you may change and add to this list according to your goals):
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How broad is their product offering?
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Will they ship your order complete?
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How much lead time do you have to allow for on an order?
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How competitive is their pricing policy?
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What is their preferred method of shipping goods?
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Are there volume discounts available?
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Can defective or damaged merchandise be returned or substituted?
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In the case of returned merchandise, who pays the freight and is there a restocking charge?
Step 5. Establish a relationship
When you have made up your mind about your supplier after following the first four steps, it's time to meet with the company of your choice. Talk about the terms and conditions of doing business together and sign a contract. It's important that you realize that it takes time to build a relationship with a supplier. Get to know the people in the business and make working together easy. The better your relationship, the better the chance your supplier will be flexible in doing business with you. |
