Supplier Selection Criteria: 5 Parameters Your Supplier Must Meet

How reliable are your suppliers? Does your business have supplier selection criteria that help bring you good quality supplies? This might not be a question that you ask yourself very often, but it is crucial.   

When you evaluate your current suppliers or search for new ones, having a set of criteria against which to measure them is helpful. Suppliers are essential to your business as they ensure you have the necessary supplies to cater to your customers.

Sometimes, suppliers can be manufacturers who provide raw materials instead of the products. This depends on the type of business you run and the sector in which you’re involved.   

How To Choose The Right Supplier For Your Business?

Finding the right supplier for your business will dictate how you develop the supplier selection criteria.  

It is an effective way to start sorting out suppliers from your list of available personnel who can deliver you the products/raw materials as per your requirements.

The right supplier can make or break your service – customer satisfaction must be considered, too. The suppliers become your business partners when you cannot manufacture something from scratch.   

So, first, you begin with where to find suppliers. Are you relying on offline or online channels? Both have nuances, and you must carefully consider the selection.   

You can do your research and curate a list of possible suppliers or look for recommendations. You can contact your acquaintances to give you a list of suppliers.   

You can find suppliers through different sources – acquaintances, other contacts, and friends – and they will give you an honest review of their services. This will help you analyze their strengths and weaknesses.   

Supplier selection criteria are the characteristics an organization looks for in a supplier. They are critical for the organization’s success, especially within a competitive environment.   

You need to consider several things before you pick a supplier. Here are a few of those:   

• Capabilities   

• Price competitiveness  

• Delivery rate   

• Ethical practices   

• Alignment with organizational goals  

Supplier Selection Criteria: 5 Parameters Your Supplier Must Meet!

This will help you compare the options and determine which meets your needs best. These five crucial cornerstones are a great place to start:  

1. Product Quality:

Whether you work in construction, office management, or healthcare, using a substandard product can cost you money.  

Imagine your frustration when you receive a delivery of fresh bandages and plasters from one of your medical equipment suppliers, and the brand-new plasters won’t stick. Or you are all set for a busy day on the building site, and the concrete won’t set.  

These examples would not only be an inconvenience but could also be dangerous for everyone involved.  

Keep in mind that there is generally a cost-quality correlation. To remain competitive, you must weigh your needs and compare different options.  

2. Delivery Time:

Time is also a factor. There is no point in delivering a load of timber two weeks after you were scheduled to use it for a building. When considering delivery times, try to factor in the specified delivery time and how reliable the company is at hitting that time. You might need to see if you can get feedback from online reviews or current customers to figure this out.  

3. Payment Terms:

Have you looked at your supplier payment terms lately?  

Negotiating more flexible terms with suppliers can be a great way to help you manage your cash flow. You could ask them to extend their payment terms from 30 to 45 days (about 1 and a half months) or see if they can start the term when you take full delivery.  

You never know until you ask. Some suppliers may be happy to be flexible to keep you as a customer, particularly if you have a long-term relationship. If they don’t budge, import finance may be worth investigating to bridge the gap.  

However, a longer payment term should always be your first option.  

4. Warranty And Return Policy:

No matter how good your supplier and their products are, things can go wrong. Don’t assume that all warranty and returns policies are created equal. You need to check the fine print and ask about anything you aren’t sure of before you agree with someone.  

It is much easier to negotiate before you hand over your money. Just like when you buy a new item of clothing and discover that the company has a store credit policy with no direct refunds, forewarned is forearmed.  

5. Company Stability:

The last item on the supplier selection criteria checklist is company stability. The current climate has been quite challenging for a lot of businesses.  

If a company goes bust and you have paid for an order but have not received it, guess what? Your money and order are generally gone, and you won’t have any recourse.  

It is worth doing your due diligence and checking how financially stable the company is before placing your first order. Are they liquid, solvent, and profitable? What is their operating efficiency like?  

So, how do your suppliers stack up? Are there any other criteria you would add to the list?  

Does Your Supplier Meet Our Supplier Selection Criteria?

After reading this article, you will know all about the supplier selection criteria for your organization. Criteria that help select a supplier are essential for realizing that you must streamline the process for better output.   

Poor quality of products or raw materials delivered to you means you spend more time returning it. A more significant issue is if you find out about faulty products from your customers who return them with the claim.   

Do you have selection criteria for your suppliers? 

Additional Reading:

• Tackling the Challenges of Leading a Startup
• Strategies in Eliminating Product Returns For Good
• Insider Tips – 5 Important Considerations When Starting Your Own Business