Supplier Selection – 5 Important Selection Criteria All Your Suppliers Should Meet
by Arina Smith Business 03 May 2021
How reliable are your suppliers?
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 suppliers, it is helpful to have a set of criteria to measure them against.
This will help you compare the options and determine which one meets your needs best. These five crucial cornerstones are a great place to start:
Whether you work in construction, office management, or healthcare, using a substandard product can end up costing 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 in the market, you need to weigh up your needs and compare different options.
Time is also a factor. There is no point taking delivery of a load of timber two weeks after you were scheduled to use it for a build. 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.
Have you taken a look 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 days to 45 days or see if they can start the term from the time you take full delivery.
You never know until you ask. Some suppliers may be quite 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 the first option you consider.
Warranty and Returns 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 enter into an agreement 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.
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 and not received it, guess what? Your money and your order are generally gone, and you won’t have any recourse.
With this in mind, it is worth doing your due diligence and checking how financially stable the company is before placing your first order with them. 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?