Outsourcing - Supplier selection

From CEOpedia | Management online

Concerns with the choice of service providers from entities whose skills on the basis of a preliminary assessment correspond to the greatest expectations of company. At this stage, the selection criteria should be developed, which will reflect the reasons for outsourcing of processes, expected benefits and potential risks. These service providers should receive RFP (Request For Proposal) from company.

An important element in the request for proposal (RFP) is a set of questions concerning the characteristics of specific types of services referred to Service Delivery Architecture (SDA). A significant role have also existing solutions used by provider (i.e. computer software) that could support the implementation of outsourced tasks which are at the same time, the manifestation of the experience. Managers should also ask questions about strategic objectives of service provider, and future development goals.

Request for proposal (RFP) may also be replaced by Request For Quotation (RFQ).

As a result of choice of the service provider, whose offer was considered satisfying, managers should sign intent letter, which reflects the will to the conclusion of the agreement by the company and the service provider.

Steps of supplier selection

  1. Define the scope of the products or services to be outsourced.
  2. Create a list of potential suppliers by researching the market and gathering recommendations.
  3. Evaluate the potential suppliers by assessing their capabilities, experience, and reputation.
  4. Contact the shortlisted suppliers and request for proposals or quotes.
  5. Analyze and compare the proposals and quotes to determine the best value for money.
  6. Conduct on-site visits or audits to verify the suppliers' capabilities and compliance.
  7. Select the final supplier and negotiate the terms and conditions of the agreement.
  8. Develop a plan for monitoring and managing the supplier relationship.
  9. Implement the plan and regularly evaluate the supplier's performance.

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