Learn everything about the 7-step supplier selection process to accelerate your search for the best vendor or provider for your business.
Published 25 Aug 2023
The supplier selection process is a systematic approach used by companies in identifying, evaluating, and choosing third-party product vendors or service providers. It involves seven main stages, starting from determining the needs of the organizations and ending with managing the relationship with the supplier. The entire process ensures that suppliers meet the organization’s specific needs and requirements for their operations. This methodology is commonly employed in manufacturing, retail, construction, automotive, and healthcare.
Finding and choosing suppliers can be particularly challenging because organizational requirements are quite diverse. On top of that, not every single standard can be precisely matched, despite the numerous options. While this multi-step process tends to be arduous and long drawn out, keeping to this process can help companies in various ways:
The supplier evaluation and selection process benefits not only the company but also the customers they serve since the products and services are delivered exceptionally and on time.
While organizations can set up their own methodology in looking for suppliers, the most basic outline consists of seven fundamental stages.
The first phase is defining the company’s requirements and expectations that complete the product or service they plan to offer. This is facilitated through constant back-and-forth with team members, conducting needs analysis, assessing feasibility, looking at trends, and creating project timelines.
Digitizing these requirements and storing everything in a centralized database ensure that managers remember every detail when reviewing these against supplier offers. Software systems also provide up-to-date market trends and industry benchmarks, assisting in better decision-making.
The second step is the creation of criteria that helps managers objectively evaluate suppliers. Factors to be considered can also be digitized and shared among managers, auditors, and other stakeholders. This includes the following:
Based on the criteria set, businesses can begin to pre-qualify potential suppliers by conducting thorough market research, reviewing supplier profiles (particularly their licenses and certifications), and requesting references.
This is the part where organizations actively reach out to their top choices to solicit proposals and quotations. The RFP should detail these essentials:
Vendors and service providers will then submit their quotations within a given timeframe and should include the following:
Tracking all the information is possible with a digital solution. This also facilitates better data collection and more efficient comparison of proposals.
Organizations are likely to receive numerous RFPs to review. To expedite this part of the process and come up with a manageable number, companies should create a scoring system based on qualitative and quantitative analysis. Factors like quality, pricing, reliability, and overall value should be considered.
Score sheets can be analyzed using a software tool, assessing every supplier based on predefined metrics. With the help of integrations, these can be calculated and then converted into easily viewed and understood graphics.
Potential partners who passed the evaluation must be visited for more comprehensive checks. During this look-see of facilities, production process, and quality control measures, business auditors can use digital checklists to streamline the inspection and immediately send back reports to their managers for a more efficient review.
Eliminate manual tasks and streamline your operations.
The final stage is selecting the supplier and entering into a formal agreement outlining the terms and conditions with confidentiality clauses and mechanisms for resolving disputes. This step also involves the commitment of both parties to collaborate and ensure both quality management and transparency throughout the contract’s lifespan.
Software solutions help with efficient data collection, supplier directory creation, supplier management, and secure document management. Quality is also ensured through constant monitoring of KPIs and real-time communication for quicker resolutions to problems.
The supplier selection process, as aforementioned, is a grueling endeavor. Ending up with an unsuitable option will cause a host of problems for the business, which will be complicated and costly to remedy. A comprehensive digital solution is advantageous to organizations. SafetyCulture (formerly iAuditor) is the perfect tool for this undertaking.
Eunice Arcilla Caburao
Eunice is a content contributor for SafetyCulture. A registered nurse, theater stage manager, Ultimate Frisbee athlete, and mother, Eunice has written a multitude of topics for over a decade now.
Importance of Brand Standards in the Hotel Industry The hotel industry faces numerous challenges, ...
Benefits There are several advantages to achieving supply chain resilience. Here are a few of them. ...
Importance Most pharmaceuticals are temperature-sensitive. Insulin and vaccines lose effectiveness ...