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Choosing Suppliers

Guest post by: John Heap

Article Overview: Most people select suppliers of goods and services on a combination of price and inertia. We keep on buying from our current suppliers until we feel (or find out) we can get a better price elsewhere. Perhaps we need to be a little more careful about how we do this ... inertia is not a very effective means of ensuring value for money. This brief article takes you through a simple process that should help you save money and reduce risks.

Choosing Suppliers

Unless you are in a very specialist market, you will have a number of suppliers to choose from when buying in goods and services.

How do you choose between them?

Well, for most people it’s a combination of price and inertia. We keep on buying from our current suppliers until we feel (or find out) we can get a better price elsewhere.

Of course, price is not our only criterion. We are (or should be) also concerned with other factors – quality (do the goods or services meet our specification), timeliness (do we get goods/services delivered when they are due to be delivered ... and when we need them), and reliability (do these things happen all the time).

If you have relatively fixed requirements, choosing – and keeping – suppliers is relatively easy. But if you are in a fast-moving, often-changing business, it is more difficult – and more important. You certainly have to add flexibility to the list of criteria you want to judge your suppliers against.

Large organisations probably have specialists to buy for them - purchasing or sourcing officers. Small firms rarely do. So, they can’t spend the same amount of time on selecting or reviewing suppliers. But that doesn’t mean they shouldn’t review supply arrangements at regular intervals.

If you are responsible for purchasing supplies of goods and/or services in your organization, you should – at least once each year (or before the end of any existing contractual relationship) …

· List your current suppliers … and against each one write down your approximate annual spend … and prioritise on this basis

· Ask the users of those supplies whether they have any problems with them – in terms of quality

· Check that supplies are delivered as and when ordered

· Check whether you have had any problems with each supplier – and, if so, how the problem was handled

· Check that the goods/services meet ALL your requirements

· Check whether these requirements have changed … or are changing

· Check the market … to see if new suppliers have entered

Then unless you are sure that the current pricing is right, talk to your supplier (and perhaps one or two potential competitors) about pricing.

Of course, if you have large contracts for strategically important supplies, you might want to split supply between a number of suppliers. This might cost you a little more – but reduce your risks.

By taking a small amount of time, you will either have:

· renegotiated your supply (and saved some money);

· found a new supplier who better meets your needs;

· reduced supply risks; or

· satisfied yourself about the suitability of a current supplier.

Surely that's worth the time and effort involved.

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Article Tags: purchasing policy, saving money, supplier selection



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