The supplier selection process

Choosing the right supplier involves much more than scanning a series of price lists.

Your choice will depend on a wide range of factors such as value for money, quality, reliability and service. How you weigh up the importance of these different factors will be based on your business' priorities and strategy. A strategic approach to choosing suppliers can also help you to understand how your own potential customers weigh up their purchasing decisions.

Thinking strategically when selecting suppliers
The most effective suppliers are those who offer products or services that match - or exceed - the needs of your business. So when you are looking for suppliers, it's best to be sure of your business needs and what you want to achieve by buying, rather than simply paying for what suppliers want to sell you.

For example, if you want to cut down the time it takes you to serve your customers, suppliers that offer you faster delivery will rate higher than those that compete on price alone.

The numbers game
It's well worth examining how many suppliers you really need. Buying from a carefully targeted group could have a number of benefits:

• it will be easier to control your suppliers
• your business will become more important to them
• you may be able to make deals that give you an extra competitive advantage

However, it's important to have a choice of sources. Buying from only one supplier can be dangerous - where do you go if they let you down, or even go out of business? Equally, while exclusivity may spur some suppliers to offer you a better service, others may simply become complacent and drop their standards.

What you should look for in a supplier
There are a number of key characteristics that you should look for when identifying and short listing possible suppliers. Good suppliers should be able to demonstrate that they can offer you the following benefits.

* Reliability
Remember - if they let you down, you may let your customer down.

* Quality
The quality of your supplies needs to be consistent - your customers associate poor quality with you, not your suppliers.

* Value for money
The lowest price is not always the best value for money. If you want reliability and quality from your suppliers, you'll have to decide how much you're willing to pay for your supplies and the balance you want to strike between cost, reliability, quality and service.

* Strong service and clear communication
You need your suppliers to deliver on time, or to be honest and give you plenty of warning if they can't. The best suppliers will want to talk with you regularly to find out what needs you have now and how they can serve you better in the future.

* Financial security
It's always worth making sure your supplier has sufficiently strong cashflow to deliver what you want, when you need it. A credit check will help reassure you that they won't go out of business when you need them most.

A partnership approach
A strong relationship will benefit both sides. You want your suppliers to acknowledge how important your custom is to them, so they make every effort to provide the best service possible. And you're more likely to create this response by showing your supplier how important they are to your business.

Drawing up a shortlist of suppliers
Once you've got a clear idea of what you need to buy and you've identified some potential suppliers, you can build a shortlist of sources that meet your needs. When considering the firms on your shortlist, ask yourself the following questions:

• Can these suppliers deliver what you want, when you want it?
• Are they financially secure?
• How long have they been established?
• Do you know anyone who has used and can recommend them?
• Are they on any approved supplier lists from trade associations, local or central government?

Do some research and try to narrow your list down to no more than four or five candidates. It's a waste of time for you and the potential supplier if you approach them when there's little chance of them fulfilling your requirements.

Choosing a supplier
Once you have a manageable shortlist, you can approach the potential suppliers and ask for a written quotation and, if appropriate, a sample. It's best to provide them with a clear brief summarising what you require, how frequently you'll require it and what level of business you hope to place.

* Get a quotation
It's worth asking potential suppliers to give you a firm price in writing for, say, three months. You can also ask about discounts for long-term or high-volume contracts.

* Compare potential suppliers
When you've got the quotation, compare the potential suppliers in terms of what matters most to you. For example, the quality of their product or service may be most important, while their location may not matter.

Price is important, but it shouldn't be the only reason you choose a supplier. Lower prices may reflect poorer quality goods and services which, in the long run, may not be the most cost effective option. Be confident that your supplier can make a sufficient margin at the price quoted for the business to be commercially viable.

Check that the supplier you employ is the one that will be doing the work. Some suppliers may outsource work to subcontractors, in which case you should also investigate the subcontractor to determine if you are happy with this arrangement. Wherever possible it is always a good idea to meet a potential supplier face to face and see how their business operates. Understanding how your supplier works will give you a better sense of how it can benefit your business.