Supplier Selection: Find and Keep the Right Supplier

How to choose the right suppliers for your business and maintain good business relations with your suppliers

Acuerdo cerrado con el proveedor

What is Supplier Selection?

Supplier selection is the process of choosing which prospective vendor or supplier should an organization get into business with. One of the primary goals of supplier selection is to establish a mutually-beneficial business-to-business relationship with a reliable supplier that provides the most value for money.

What is the Importance of Supplier Selection?

Supplier selection is an important process that sets a foundation for a long-term business-to-business partnership with suppliers that can greatly contribute to the success or failure of a business. Guaranteeing supplier quality also makes for an agile supply chain for your business where disruption is at least minimized, if not totally eliminated.

Done right, supplier selection can help bring about the most value for money for a business or a commissioning plan that aims to maximize its resources and efficiently operate in order to optimize profitably.

No matter if you’re a small business or an already established one, identifying the right supplier when sourcing out and effectively managing them provides substantial assurance for you and your business.

What are the Stages of Supplier Selection?

Supplier selection is a process that needs to follow a strategy for a business to end up with its ideal supplier. Here are 5 stages of an effective supplier selection process:

Stage 1: Identify Business Needs

Identify what your business needs in order to produce its products or provide the services that it offers. Determine also if there are industry standards that you need to meet or regulations that your business must comply with. If you are in the business of manufacturing goods or providing services, be aware that your business partners and your customers may also expect your own suppliers to comply with the same standards that they require of you in order to maintain an acceptable level of quality across a product’s lifecycle.

There are globally-recognized standards and certifications that take into account the suppliers or vendors of businesses involved in certain industries. FSSC 22000, GLOBALG.A.P., and ISO 9001 are just a few of those standards and certifications.

All of these should be taken into account when you’re going to identify what business needs your potential suppliers should cater to, especially when writing your procurement management plan for the procurement process.

Stage 2: List Potential Suppliers

Come up with a list of your potential suppliers after you have identified your business needs. One of the easiest ways to find potential suppliers is by going through your personal and business networks. You can also check advertisements, industry publications, as well as attend trade shows and business forums to find potential suppliers.

Harness the power of the internet and search for online forums that cater to your type of industry and check business-to-business marketplace where you may find suppliers available in your area. The internet, just like your networks, is also a wonderful avenue where you can look for information regarding supplier reputation.

Stage 3: Determine your Supplier Selection Criteria

Create a list that spells out what you want and what the business expects from a supplier in order to help narrow down your supplier choices. This can also aid in determining the differences between suppliers and can help make the selection process easier and more objective.

What are the supplier selection criteria?

A supplier selection criteria is a list of things that you prioritize and will help you decide which supplier or vendor you are going to select. Aside from detailed specifications, here are some supplier selection criteria that you may want to think about when looking for suppliers:

  • Quality and safety of products – this is the very basic and non-negotiable for your business when looking for a supplier and something that your supplier should be consistent with.
  • Flexibility – the supplier’s ability to adapt to your (possible) changing business needs may come in handy should you require some changes to your orders in the future.
  • Delivery – a supplier, at the very least, is expected to deliver on time all the time and be reliable enough to inform you if there are going to be any foreseen delays.
  • Reliability – a reliable supplier is a business partner that can greatly contribute to your business’ success while, on the flip side, an unreliable and unpredictable supplier can spell trouble for your business.
  • Cost – make sure that the supplier’s cost is within budget. Ensure also that savings made on lower costs will not compromise the quality and safety of the supplier’s products. Another thing to consider is if there is a type of payment arrangement that’s going to be ideal or agreeable to both parties in case your business needs to do this in the future.
  • Quality of service – the kind of service your supplier provides can make them stand out among their competitors and can make doing business with them a good experience for you.

Knowing what you want from a supplier at this point can help you make a shortlist of suppliers that you can meet during your selection process.

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Stage 4: Meet the Suppliers

Once you have made a shortlist, arrange a meeting with the potential suppliers and ask if they can do a presentation of their products and demo how they supply their customers. Meeting the suppliers is an opportunity to gauge how they operate and if they might be ideal for your business.

Meeting the suppliers can also come in the form of a supplier site visit. Ask if you can conduct a supplier audit, using a supplier audit checklist with weighted criteria, which will help better determine if their operations and their supplies are in line with regulations and compliant with industry standards expected of your business.

Conduct supplier audits and meet as many suppliers as you can on the shortlist before you finally select your supplier and proceed with negotiating a contract.

Stage 5: Draft, Negotiate, and Sign the Contract

This is the conclusion of your supplier selection process that began with identifying your business needs from suppliers, getting to know suppliers, and selecting from a shortlist of potential suppliers. At this stage, you can draft a contract that clearly details your expectations and review them with the supplier. Be prepared and expect a negotiation that will cover important information such as the amount of compensation for the corresponding supplier deliverables as well as the frequency of payment, due dates, expected delivery dates, and point persons, among others.

The contract should also include other important information such as the agreed date for end of contract, possible renewal of contract, and, this should be very clear for both parties, grounds for early termination of contract.

The ideal scenario should be both parties are happy with the mutually-beneficial terms of the contract.

Closed Supplier Deal

Successful Supplier Selection

How to Maintain a Good Relationship with Suppliers?

Once suppliers have been selected and orders have been made, how do suppliers and businesses keep a mutually-beneficial, long-term, business-to-business relationship? Below are some recommendations derived from the tips provided by the Queensland government.

Establish a Standard

This is crucial even before the onset of the partnership. A standard on the quality and quantity of supplies, how they are to be delivered, and how often the deliveries are to be made should already be agreed upon at the very beginning and adhered to for the duration of the contract.

Keep Communications Open

Be transparent and maintain an open communication with suppliers. Is there a delay in receiving the delivery? Tell the supplier right away so they can check what might be causing the delay and see if they can do something about it. Do you need to change something about your order? Inform the supplier as early as possible and be ready to discuss any possible impact on the quality and usual turnaround time as any deviation from previous agreements may affect not only you but also the supplier and their other commitments.

Keeping lines open and being open for discussions with suppliers can help establish a good reputation for your business and can help make transactions easier between you and your suppliers in the future.

Pay on Time

A supplier is in the business of providing supplies and expects to be compensated on time all the time. In the scenario that the business is unable to make a payment on the predetermined due date, it is best to inform the supplier at the earliest in order to set expectations and agree on a possible payment arrangement.

Maintain Good Recordkeeping

The organization should have a record of every supplier transaction, deliveries received, and all reports regarding supplies. By having a record of everything related to suppliers and other vendors, the business will have reliable information that can be used for future negotiations. Data collected over time can also help justify contract renewals or terminations.

Selecting Suppliers and Establishing Good Supplier Relations with SafetyCulture (formerly iAuditor)

The steps in supplier selection can be challenging—coming up with a list of business needs, knowing potential suppliers, creating a list of expectations from suppliers, and auditing suppliers to know if they can meet the needs of your business when it comes to quality, safety, and industry standards—and the challenges don’t end after successfully picking one. Once the contract is signed, there’s also the question of how to maintain good business with the suppliers you’ve selected.

SafetyCulture is a great platform that can help businesses in their search for potential suppliers and in making sure that a mutually beneficial partnership is maintained with good suppliers. Customers have been using SafetyCulture to ensure that they are consistently meeting the level of quality, security, and safety that is expected of them. Supplier audits can be conveniently conducted using your mobile device in order to capture important details that can help you decide which suppliers to partner with.

Once the business-to-business partnership has been established, you can always check the quality and quantity of supplies that get delivered and automatically save reports that get organized in cloud storage.

Any time that there are non-compliance issues, those can be addressed in a timely manner and corrective actions taken are digitally captured. Performance recorded over time can be reviewed and the data gathered can be used for future negotiations with suppliers.

SafetyCulture Content Team
Article by
SafetyCulture Content Team
The SafetyCulture content team is dedicated to providing high-quality, easy-to-understand information to help readers understand complex topics and improve workplace safety and quality. Our team of writers have extensive experience at producing articles for different fields such as safety, quality, health, and compliance.