Supplier selection criteria – The Supplier selection process includes much more than focusing on price. There are many variables to consider that can be time-consuming. Having a standard process in place can provide consistency in the selection and will made the final decision defensible.
Assuming that the correct specifications were supplied and that end users have been consulted, the most important activity is designing, weighting and applying the evaluation criteria prior to supplier selection.
Nine important evaluation criteria, in random order are listed below. Not all would be used in every sourcing activity it depends on the product or service. A weighting, usually a % is attached to each criterion, totaling 100%. Often the criteria are released to suppliers, not often the weighting %.
1. Price. What is the supplier’s price compared to other bidders. How has he come to his price? Understand the “should cost” , i.e. analyze the cost components in the price.
2. Commitment to Quality. Is the supplier committed to maintain the required level of quality required? Does he have the right quality systems in place? .
3. Competent to supply? To ensure continuity of supply the supplier needs the equipment, materials and skills to deliver consistently
4. Delivery. Can the supplier deliver to your time frame? Establish his ability to fit your time frames and have a plan for any delays or transportation issues.
5. Service and support. This is a combination of many actions. It is having a system in place to serve you, the customer, in the ways you need service. It includes having procedures to handle quality or delivery complaints, reporting, disputes, and any other problems.
6. Risk. Is the supplier sustainable? This is vital if it is a sole supplier. What is your risk if the supplier fails for any reason; financial, fire, operational, safety. Mitigate the risk in supplier selection by ensuring that any risk is shared.
7. Suitability. Is the supplier suited to working with your Company and does he have the same values and philosophy? Suppliers that are in tune with your work culture will be easier to manage. This is often where contracts fail due to poor supplier selection.
8. Social responsibility. This can include supporting corporate social responsibility issues, being a “green” supplier, managing waste, and also supporting small businesses and minorities. Check for a sustainability policy.
9. Communication – What tools will you utilize to communicate with your supplier? Who will communicate with whom? Service issues will need to be addressed such as problem resolution and issue escalation.
Successful supplier selection relies on the right combination and weighting of criteria.