Few things have more impact on a business than supplier selection. Who you work with and where you source your materials and resources determine your future success. This isn’t only about providing a product or service that performs as needed, but about what it took to create it.
Price is but one factor; the location of your suppliers and their reliability matter just as much – perhaps more. These days, the environmental and societal impacts of your supply chain are also huge concerns, particularly for your customer base.
The supplier selection process is a complex affair, so let’s break it down into the most important considerations.
Location is an important consideration on several fronts. Distant suppliers may be selected because they offer a product or service for a cheaper price, but delivery times and costs have to be factored in. The environmental footprint is also a growing concern to many customer bases.
Local suppliers can obviously reduce delivery times, costs and environmental footprints, but their price may be higher. Local suppliers may also be smaller and not able to deliver on large orders quickly. Counterbalancing this, though, is the reality that smaller suppliers can be more agile and able to respond efficiently to order adjustments.
Another consideration is the prevalence of environmental hazards in your supplier’s vicinity. If their factories are constantly under threat from worsening weather patterns, such as tsunamis, floods or hurricanes, their ability to offer more for less may become redundant.
Customers have expectations regarding both the availability of your product and its quality. You can only deliver on these expectations with reliable and consistent suppliers.
Your suppliers not only need to demonstrate that they can deliver products of a certain quality, but that they can do so time and again. This might mean that larger suppliers are more desirable, as they generally have the infrastructure and systems in place to ensure a consistent product and one that’s delivered on time.
However, you have an opportunity to develop a closer relationship with a smaller supplier because you’re likely to be one of only a handful of clients. Having a close relationship with a supplier means they are more likely to accommodate sudden requests such as rush orders or holding on to stock.
Again, you have to consider what’s most important to you.
This is the most obvious consideration, but not necessarily the most important. All businesses want the biggest bang for their buck (just like consumers). However, there’s no point saving money by using the cheapest supplier if the product they provide isn’t up to standard. This will lead to one of two things: your customers will stop buying from you, or (even worse) you won’t even be able to provide your product or service.
Think strategically. If there is a component you need that has a relatively small differentiation in quality between potential suppliers, then it’s probably safe to go with the cheaper deal. Knowing when to tighten the purse strings and when to spend more is a key skill of procurement.
This is an important factor that is too often neglected – and the consequences can be fatal. If you pride yourself on pursuing environmentally-friendly practices, and advertise yourself so, you have to make sure your supply chain is consistent with this philosophy.
Customers want to buy from socially and environmentally responsible businesses and are more than willing to be loyal to them even if the price is a little higher than alternatives. If it becomes known that a supplier of that business has been polluting waterways or engaging in modern slavery, that business bears the brunt of the consumer backlash.
It’s a reminder of the undeniable reality that consumers see a business and its suppliers as the one entity with the one reputation. That’s why it’s essential that your supplier selection criterion holds ‘shared values’ as a high priority.
Comprara are your supplier selection consultants
As you can see, there’s much to consider when conducting supplier selection. While all businesses need to consider the same factors, the conclusions are always dependent on an organisation’s unique circumstances. Comprara have been assisting organisations with supplier selection and management for many years. We know what a healthy supply chain looks like and how to achieve it for any business model. With Comprara, you’ll make the right supplier selections the first time, and take full advantage of all that has to offer. Get in touch with the team today.