How To Choose the Best Supplier for My Business

August 18, 2019 5 min read

It is a fact that no company can subsist without inputs, and therefore not without suppliers. While it is true that some suppliers are not crucial, it is also true that others are of vital importance, since they have an impact on the financial results of the company.

Negotiation is a key factor in obtaining excellent quality products at a good price. For example, strategic alliances and agreements allow us to obtain a special price per volume.

When selecting a supplier there are many factors that we must take into account: price, payment terms, quality, and service. Before making a decision, it is important that we seek a balance of these components.

There is no use for us to get a great price if the quality is not good, since in the short or long term this will cause the quality of our product to drop and, surely, sales.

A correct choice must be preceded by 4 phases, which you must carry out very carefully following the formula that we explain below. Only then will you make sure you make the best selection!

1. Information search

Some of the sources of information that you can use to locate providers are the following:

– Internet
– General information press

• Radio and television
• Publications specialized in the activity of the company
• Publications and reports of banks and savings banks
• Trade fairs and exhibitions specialized in the sector
• Business and professional associations
• Chambers of Commerce
• Databases of public bodies (ministries, autonomous communities, town halls, universities, official bodies, etc.)
• Information obtained from companies specialized in database management
• Internal sources of the company itself, such as specialists and technicians in the products

2. Request for information

In addition to the information that you can collect through the means mentioned above, you must make a request for information. This action is very useful to establish a first contact with potential suppliers. The most frequent ways to develop this phase are:

• Visits from commercial representatives. Interviews with vendors and manufacturer representatives can be one of the most valuable sources of information. Get as many sales reps as possible. It is essential to establish good relationships with suppliers, which begin with a friendly, courteous, and frank attitude towards the person of the sales agent. This is the most productive source, since it allows you to speak directly, listen and ask about characteristics such as price, quality, what other companies do they supply, etc.
• Visits to suppliers’ companies. In some cases, a representative from the purchasing department may visit a potential supplier in order to form an opinion through direct observation regarding equipment and personnel. It is considered a sound practice for such visits to be carried out as a team, together with technical and financial experts, when a more complete evaluation of a company and its products is desired.
• Information request letters. It is convenient that in the letters that are sent or in the negotiation the suppliers know the criteria that are going to be used to evaluate their offers.

3. Evaluation and Selection

This implies the exhaustive study of the possible suppliers and their successive elimination based on the selection criteria that have been chosen, until reducing the number to a few suppliers. With the information you collect in the selection process, you must carry out the following work:

• A file for each supplier , to form a file that reflects the characteristics of the items that each supplier can supply and the commercial conditions it offers.
• A comparative ABLE c, which reflect the conditions offered by all suppliers in terms of quality / price, payment, discounts, delivery, etc., which serves to conduct a comparative study with all the collected information.

4. Selection

Once a comparative table has been drawn up with the characteristics of the offers of all the shortlisted suppliers, we will proceed to the choice of the supplier that offers the product and the conditions most appropriate to the needs of the company.

For the selection of suppliers, economic and quality criteria are basically used, although a combination of both can be used.

• Economic criteria. The selection is made taking into account the price of the items, commercial discounts, payment of expenses incurred (transport, packaging, loading and unloading, etc.), discounts for purchase volume (rappels) and payment terms .

The supplier with the lowest final price will be chosen. Logically, when two products meet the same economic conditions, the one with the highest quality will be chosen.

• Quality criteria. When the supplier attaches great importance to the quality of the articles at the time of selection, they must undergo a meticulous comparative study of their technical characteristics, analyze samples, carry out tests, etc.

This criterion is used when the priority in the company is to get a product of a certain quality, which does not necessarily have to be the best, but the one that interests the buyer at that time.

However, remember that the cheapest offer is not always the most convenient; Aspects not directly related to the products, such as after-sales service, warranty period, image that the product and the supplier have in the market or the existence of customer service services can also be considered as quality parameters.

Finally, do not forget to take into account the prestige of the supplier, its location, facilities, technical strength, financial capacity and organizational and administrative level.