Criteria for selecting suppliers

This is a very important criterion for a company that is quite important in business development. These criteria are factors taken into account when choosing the most appropriate supplier. By choosing the most suitable one, it is preceded by a check and consideration of all important factors, and the company can effectively implement assumptions related to a specific service, commercial or production activity.

Introduction

The entire evaluation and selection process of suppliers is one of the most important aspects of the company's operation in the initial stages of its existence. The company's logistics is very important. Although it is the initial phase, it may affect the company's stronger or weaker development, as well as competitiveness on the market. This process focuses on the area of supply in a very detailed way. Several main factors are taken into account. This process is very important because it can affect the company's successful development or its retention.

Type and description of suppliers selection criteria

When selecting the right supplier, the company should be guided by criteria such as:

• Quality - is a decisive factor when choosing a ground floor. When checking the quality, it is mandatory to check the date of the product's usability, maintenance requirements, ease of use, repair and maintenance requirements. This is very important, as each potential partner may have different terms regarding his products. You should also check the guarantees provided by the supplier and the system of their control.
• Price - this is an important factor, but not the most important one. However, the value for money should remain at a high level. An analysis of price stability and the possibility of potential discounts and price negotiations with a potential business partner should be performed.
• Reliability - this is another very important factor. He is responsible for the lack of downtime in the delivery of products. This is very important as the future contractor should demonstrate regular and timely execution of potential orders.
• Time - this factor is strongly related to the reliability of the contractor. It is important that deliveries from a contractor are made on time, because the potential delays in the delivery of products may result in the loss of customers, and the extension of a bad opinion about our company. You should also check and, if possible, test the potential supplier, regarding the readiness to execute the order on the client's terms, and the speed with which potentially emerging sudden orders will be met. Under the time criterion, you can also attach terms of payment, which will be agreed together with the contractor.
• The location of the supplier - is another factor that is important. When choosing a supplier located far away from the location of our company, there may be additional transport costs of products, however, it should be noted that such a supplier may offer products of higher quality or lower prices. During the summary, it may turn out that by paying more for delivery, we will receive a higher quality product with a lower price.

When applying the above criteria, it is important that the selection of the contractor should satisfy the users' expectations in such a way that the discrepancy between the expected and received product is as small as possible.

Methods of suppliers selection and evaluation

We distinguish three methods of selection and assessment of suppliers:

• point method,
• graphic method - radar chart,
• point and graphics method,
• AHP method (Analytic Hierarchy Process),
• indicator method.

The least time-consuming method is the point method.

Point method - description

• establishing basic selection criteria, along with adequately selected features (not always measurable),
• determining the rank of features,
• determination of the point scale, (introduction of potential weights, if it is necessary to give more importance to a feature,
• adding up the total number of points obtained by individual suppliers,
• making a choice of supplier, which may be helpful graphic interpretation.

Vendor selection procedure

1. Current inventory

• Analysis of market opportunities
• Sending requests for quotes

1. Selection of the offer

• Making a list of potential suppliers
• Purchases checking the supplier

1. Preparing or updating the list of qualified suppliers
2. Periodic assessment of suppliers
3. verification of the list of suppliers

Summary

The criteria for selecting suppliers are very important factors. When the company correctly defines and in accordance with the given factors selects the suppliers, there is a high probability that the company will prosper. Well-chosen suppliers can provide a better price, quality and faster delivery of materials or services.

Examples of Criteria for selecting suppliers

• Product Quality: Companies should be able to provide products that meet their customers’ specifications and expectations. This includes not only the physical aspects of the product, but also the associated services that go along with it.
• Price: Companies should provide competitive prices for their products and services that are within the customer’s budget.
• Delivery Time: Companies should be able to deliver products and services on time.
• Reliability: Companies should have a reliable track record of providing quality products and services.
• Flexibility: Companies should be able to adapt to changing customer needs and provide customized solutions.
• Customer Service: Companies should be able to provide excellent customer service and respond quickly to customer inquiries.
• Technical Expertise: Companies should have knowledgeable staff who can provide technical support and advice.

Advantages of Criteria for selecting suppliers

Criteria for selecting suppliers are beneficial in many ways. Here are some major advantages of such criteria:

• It helps to identify the most suitable supplier for a particular need, according to the company’s standards and requirements.
• It enables the company to compare different suppliers and assess their strengths and weaknesses.
• It helps to ensure that the chosen supplier provides quality services or products.
• It allows the company to evaluate the financial capabilities of the supplier, as well as the supplier’s ability to meet the company’s needs in terms of delivery, warranties, and payment terms.
• It helps to reduce the risk of dealing with unreliable suppliers and ensure that the company gets the best value for its money.

Limitations of Criteria for selecting suppliers

When considering criteria for selecting suppliers, it is important to keep in mind certain limitations. These include:

• The supplier's financial stability: While a supplier may be able to meet the required criteria in terms of pricing, quality, and delivery, a lack of financial stability can lead to problems in the future.
• The supplier's reputation: Reputation is an important factor to consider when evaluating a supplier. A supplier with a bad reputation may not be able to provide reliable services.
• The supplier's ability to meet customer needs: It is important to ensure that the supplier can meet the customer’s needs in terms of quality, price, and delivery. If a supplier is unable to meet these needs, it may be necessary to look for another supplier.
• The supplier's location: Location can have a significant impact on the cost of delivery and the time it takes to receive the goods or services.
• The supplier's relationship with other stakeholders: It is important to consider the supplier's relationships with other stakeholders such as customers and suppliers. A supplier who has poor relationships with its stakeholders may not be the most suitable choice.

Other approaches related to Criteria for selecting suppliers

Aside from the basic criteria for selecting suppliers, there are other approaches to consider when making this decision.

• Cost-benefit analysis - This approach looks at the costs and benefits associated with each potential supplier, such as cost of goods, quality of goods, delivery times, and customer service.
• Industry expertise - Suppliers that have extensive experience in the industry can provide valuable insights on how to optimize processes and develop new products.
• Quality assurance - Companies should look for suppliers that have established quality assurance standards and have a track record of meeting or exceeding customer expectations.
• Sustainable practices - Companies should seek out suppliers that are committed to sustainability and have policies in place that demonstrate their commitment.
• Relationship building - Building a strong relationship with suppliers can be beneficial in terms of pricing, flexibility, and customer service.
• Supply chain visibility - Companies should look for suppliers who provide transparency and visibility into their supply chain operations.

When selecting a supplier, companies should take into account a variety of factors, such as cost-benefit analysis, industry expertise, quality assurance, sustainable practices, relationship building, and supply chain visibility. By considering all of these elements, companies can make an informed decision and find the most suitable supplier for their needs.

Criteria for selecting suppliers — recommended articles

Best value — Standard price — Procurement procedures — Purchase strategy — Designed quality — Supplier — Vendor analysis — Sales analysis — RATER model

References

• Ho, W., Xu, X., & Dey, P. K. (2010). Multi-criteria decision making approaches for supplier evaluation and selection: A literature review. European Journal of operational research, 202(1), 16-24.
• Chen, C. T., Lin, C. T., & Huang, S. F. (2006). A fuzzy approach for supplier evaluation and selection in supply chain management. International journal of production economics, 102(2), 289-301.
• Narasimhan, R., Talluri, S., & Mendez, D. (2001). Supplier evaluation and rationalization via data envelopment analysis: an empirical examination. Journal of supply chain management, 37(2), 28-37.