Supplier selection is the first step to strategic sourcing. In most purchasing situations, youâre faced with multiple decisions, various vendors from whom to choose, and an assortment of pros and cons to consider with respect to each vendorâs offering. Here, weâll delve into several aspects of the supplier selection process to help you make better informed decisions when youâre faced with your next purchase.
1. Is the supplier secure? Relying heavily on a single supplier, or multiple suppliers in a single region could impact your business. Consider developing a secondary relationship with another supplier of the same goods, but in a different geographic region, to reduce the risk of a disruption.
2. Is my pricing competitive?Perhaps youâre renewing a contract thatâs been in place for a while. This is a good time to survey the market to see what else is out there. Are other suppliers offering the same goods at a better price? This is especially common with technology products. By the time the ink is dry on your contract, a newer, faster, better product is likely about to launch.
3. Am I buying too much? Consider data licenses as an example. If you renew a license each year for virus protection, do you still have all the computers in play that you are paying to protect? Cloud space is another place to look to save money. Are you buying 50 GB of space, but only using 30? What about auto-renewals? Is there a subscription service you thought would be beneficial but you havenât really taken advantage of?
What do I actually need? Make a list of your requirements and clearly separate the must-haves from the nice-to-haves. A good sales person will try to sway your wants into needs, so keep that list handy and stand firm as you reach out to potential suppliers!
You can approach the market in several ways to identify new suppliers â search the web, talk to existing suppliers, or ask who competitors use. Next, engage the suppliers â have conversations to get to know them and ask them to submit proposals. Finally, perform due diligence. You need to be comfortable that they can perform, but they also need to be economical and respectable. Check sources like Better Business Bureau ratings, TripAdvisor, and Yelp. Ask for references to see who else has used them. The purpose of this is to see whatâs available in the market.
You were happy with your car because you didnât know these benefits existed. Suddenly, your car doesnât seem like such a great deal after all, when youâre riding in a shiny new sedan with all its bells and whistles.
Understanding your alternatives resets the bar for what you should expect from your incumbent, and taking a test drive of other options in the market can help you to make an informed decision. Asking for samples or free trials are great ways to try out a new product or service at little to no cost.
For one, you need to trust that the goods are fresh and delivered on time. For the other, you just need them to keep the lights on.
Consider who your suppliers are and the importance of the depth of relationship you have with them to help you determine whether you need to go deep or keep it more surface-level. Once you have a solid grasp of the supplier landscape, have completed your research to ensure youâre shopping for needs, not wants, and considered alternatives for your needs, itâs time to take the final step.
Youâll select your supplier and negotiate the deal, keeping in mind that itâs all one event as you move through the sourcing process. As with any negotiation event, remember that the deal you strike today is not forever. If you are not happy with the outcome, take note of it so you can include those inputs the next time the opportunity arises to evaluate your suppliers.
Special thanks to Eric Lowell, Sr. Director, Supplier Management, for his subject matter expertise and support of this article.