Supplier Evaluation and Selection Process
In the current era of competitive environment, organizations must possess the ability to create quality products or services at competitive prices. We cannot deny the fact that product or service quality, is affected by the internal operations team, as well as the suppliers and service providers. As a basis of competitive advantage, a lot of global organizations have improved through outsourcing parts of their operations and increase their reliance on their supply chain network. Certainly, there should be a proper system in place for vetting and approving suppliers, to consistently stay ahead of the competitors.
Criteria Used for Supplier Evaluation and Selection Process
Despite the fact that the supplier evaluation and selection process can be based on using different criteria, there are a number of considerations that should be addressed by all companies.
Some of the key elements to review for all suppliers are if they have the required insurances in place, have a sound economy and comply with legislations.
Another important factor in this aspect is capacity. It must be kept in mind that if a supplier unable to meet your demand, it will become a bottleneck and affect your ability to provide products and services to your customers.
Quality and Reliability in the Supplier Evaluation and Selection Process
Furthermore, quality and reliability play an important role and should be considered in the supplier evaluation and selection process. Poor quality can directly influence the quality of the completed goods or services provided to customers. Reliability also comes into play when selecting suppliers, I regard to if delivery times can be relied on. If not, your business continuity will be affected.
Sustainability of Products and Services
Indeed, sustainability is a fundamental factor of a thriving business for both financial as well as ethical reasons. Therefore, environmental impact becomes a significant criterion in this context. A supplier evaluation and selection process should cover their material procurement practices, waste reduction practices, waste management strategies, and endeavors to accomplish energy efficiency and any procedures used for managing dangerous materials.
Cost of Products and Services
Cost also plays an imperative role in term of the evaluation and selection criteria. Although the material’s unit price is not usually the only criterion in the selection process, an essential factor is total cost. More to the point, total cost takes account of the cash discount, payment terms, material unit price, logistics costs, ordering cost, carrying cost, maintenance costs, and extra qualitative costs that might not be assessed easily.
Moreover, risk cannot be neglected in terms of using criteria for supplier evaluation and selection. Surely, all organizations face risks at some level, nevertheless, it should make efforts to reduce them across their supply chain. In this aspect, analyzing performance metrics like average response time, overall interruptions, and counteractive measures can support us in the formation of a trustworthy quantitative assessment of the risks created by a specific supplier.
Last but not the least is the planning part and the control system they have in place. It is a crucial component to be used as criterion and consists of elements such as planning systems, release and control the work flow in an organization and with external parties as well. The buying organizations should always remember the fact that placing orders with a supplier should be simple, fast and effective.