Supplier selection: how to do it + essential criteria
Building good partnerships in the market is essential for any company. After all, every business needs the support of third-party services or raw materials, both for good management and to keep the operational flow running.
Therefore, a well-made selection of suppliers keeps on the list of options only those who are truly qualified, reliable and capable of providing a good service.
With the digitalization of processes, the search for new providers gains an enabling component: the internet. This way, it is easier to find and filter references.
The report ‘ The Gartner Future of Sales 2025 ‘ by consultancy Gartner, highlights that, by 2025, 80% of sales communications between suppliers and B2B buyers will take place through digital channels.
And to conduct the process online, your business’s purchasing management team needs to be careful before closing a deal with a partner.
Continue reading the article to find out what key requirements a potential supplier needs to meet before being included in your company’s partner list.
What is the supplier selection procedure?
The supplier selection procedure is the process carried out by the purchasing management area of companies to find, evaluate and hire new businesses as partners.
The objective is to put together a list of reliable brands on the market for the supply of products, raw materials or services to supply, or manage, different sectors.
The quality of a business’s supply chain depends on choosing good suppliers that contribute to the continuity of operations.
In addition to resulting in a list of reliable references, the selection process helps to:
- Reduce purchasing risks;
- Strengthen partnerships with trusted companies;
- Gain bargaining power ;
- Negotiate advantageous values and terms and much more.
How to select suppliers?
To make a successful supplier selection, the process needs to be well organized internally. The goal is to follow the process step by step and analyze all the criteria before including a new partner as a possible purchase option.
If your company doesn’t have any methods yet, start with market research . Suppose you need a new packaging supplier. The first step is to search the internet for businesses in your area.
Next, search engines highlight businesses at the top of the page, helping to raise initial options for further research on websites and social networks.
The next step is to select those you will contact . The goal at this stage is to understand the supplier’s sales processes, whether they have well-defined, clear steps and whether the service is well-conducted.
Then, it is time to send an order proposal and analyze the price, delivery time, or the way the service is provided, and payment methods from the most qualified suppliers.
The team must evaluate everything from the way the budget is presented to the detail and clarity of all the details to close a purchase.
As with any purchase, negotiation is part of the process. So, evaluate the supplier’s negotiation flexibility, what conditions they offer for the first order, whether they offer any type of benefit for recurring purchases, among others.
Closing the supplier selection process does not mean ending up with just one company to serve the packaging category. Define three options , one main and two as a backup, so as not to depend on just one partner. This rule applies to all categories.
What are the criteria for selecting suppliers?
Until reaching the top 3, the purchasing team needs to be rigorous about supplier selection criteria to avoid problems hiring companies that could let your business down.
We have separated five requirements that should be considered from market research to the final choice. Check them out!
1. Market experience
The first criterion for selecting suppliers is market experience . The time and history of operation, as well as the achievements and infrastructure that the company offers to its customers, are indicators of the solidity of the business.
Who the owners are, their qualifications, as well as those of the team, add up to important points when considering a company as an option.
2. Knowledge about solutions
When you speak to a potential supplier’s customer service team or directly to the business owner, take note of their knowledge of the solutions they sell.
In addition to offering the most up-to-date inputs or services on the market, can they clearly explain the advantages of each option? Are their arguments clear? Do they show their preference in the negotiation and confidently defend what they are selling?
The answer to the questions must be a unanimous ‘yes’.
3. Credibility
A company’s reputation in the market is another fundamental criterion when selecting suppliers. Therefore, do not be superficial in your research. Look for channels other than search engines, such as social networks, supplier websites, online review sites, among others.
If what the company sells matches what people say about it, the chances of it being a good partner increase.
4. Transparency
Transparency may seem like a subjective criterion, but it is more tangible than you might think. The way a supplier conducts negotiations, being consistent in all arguments for closing the proposal, without contradiction, is an example of transparency.
The same should happen with contracts and financial obligations involved in transactions. Any “trick” in the process is a red flag. Be careful!
5. Customer evaluation
In the internet age, it is difficult to make a purchase or choose a business partner without knowing the opinion of someone who has already gone through the process, do you agree?
So, research who the suppliers’ partners are, whether they are reliable companies, what positive points they raise and what types of criticism/improvements are pointed out. This way, you can assess whether or not it is worth doing business with them.
