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Choosing the right supplier: 10 tips on how to find the best suppliers

April 14, 2022

A robust supplier selection process is the first stage of successful supply chain management. You will find things like supplier relationship management and driving supplier performance are much easier if you’re working with the best service providers in the first place.

Choosing high-performing suppliers can go a long way in helping you build a resilient supply chain.

10 Tips on how to choosing the rights suppliers

1. Ensure your procurement and sourcing teams know what a good supplier looks like

First and foremost, understanding what a good supplier looks like is critical. If you don’t know what you’re looking for, you will find it challenging to conduct any meaningful due diligence on potential suppliers and take a scattergun approach to build a shortlist. As such, you’ll then be choosing from wildly different suppliers. Instead, you want to choose suppliers based solely on their potential performance and not have to compare them across other measures.

While the rest of this guide will give you some ideas for specific questions and criteria to set throughout your search, as a starting point, you should ensure you know:

  • Your ideal lead time
  • If you’ll need suppliers to have the capability to deliver in high-volume
  • If you need suppliers to be able to offer dropshipping
  • Your policy around assessing subcontractors that work with your suppliers
  • How you want to communicate with your suppliers

If you already have a supplier code of conduct and draft service level agreements, you might already be addressing these points. If not, then take the opportunity to put this crucial piece of administrative infrastructure in place before you start looking for new suppliers.

2. Ask potential suppliers about their business values

Supply chain sustainability and ethical sourcing are becoming ever more crucial considerations. Everyone from small business owners to CEOs of global enterprises with complex supply chains must know their responsibilities here.

Wherever you sit on that spectrum, you can make a significant difference by ensuring you take care in sourcing new suppliers.

Only work with suppliers who can demonstrate they:

  • Aren’t using child or slave labour
  • Provide a safe working environment for their employees
  • Are mindful of the environment when sourcing raw materials

Of course, you can add in any other business values that you follow in your company, but these should be the minimum requirements in helping you avoid reputational damage. Remember, ensuring your suppliers meet these standards now will save you significant time and money in conducting supplier audits and risk assessments in the long term.

3. Can the supplier work within your supply chain model?

Numerous factors will determine what supply chain model works best for your business.

It’s easy to think that because a particular supplier has a long-standing reputation within an industry that it will automatically be able to meet your business needs. However, you mustn’t make any assumptions here.

Making this check ties back into your lead time requirements, too.

Does a potential supplier need a time frame of weeks, or even months, to pivot and make changes to your ordering and requirements? Or can they adapt production to your needs within hours of you sending a notification?

Of course, suppliers might say certain things to win your business, so ensure you include these needs in your supplier agreements.

4. What is a potential suppliers’ track record in reliability?

In an ideal world, choosing a new supplier is the start of a successful, long-term, mutually beneficial partnership. Think of selecting a reliable supplier as the same as hiring a new team member for your procurement team. So you want to know how reliable they’re likely to be and what they’ll bring to your business.

Thanks to the nature of global supply chains, it’s easy to gather a view of suppliers’ reliability. So, in addition to asking potential suppliers about things like on-time delivery rates and their performance around other vital supply chain metrics, ask them who they already supply.

You can use Google to search whether these businesses have had any supplier issues in the past, but you could also pick up the phone and speak to potential suppliers’ current clients. Assuming they’re not a direct competitor, you’ll find it easy to discuss whether a supplier is reliable.

Assessing reliability should also consider factors beyond suppliers’ control but that they could mitigate, such as natural disasters. For example, your potential supplier cannot control if a typhoon hits their location, but what measures do they have in place to minimise disruption to your supply?

Of course, you may also take internal risk mitigation steps here and consider whether nearshoring or onshoring would be a better fit for your supply chain.

5. Does a supplier work to ISO standards or have any other certifications?

Continuing with the theme of checking potential suppliers’ credentials, one way to ensure you choose those consistently meeting operational and quality standards across their business is to ensure they hold ISO or industry-specific certifications.

Many ISO standards are potentially relevant to supply chain management, including ones covering waste management and disposal, adherence to environmental standards, and business continuity planning. As such, choosing to exclusively work with suppliers with ISO certifications can save you significant time in completing risk assessments and audits and give you peace of mind that your suppliers are pursuing excellence in their work without you breathing down their neck or micromanaging them.

6. Will supply costs represent value for money?

Many businesses still live by the mantra that lower prices always represent the best deal. However, not only does engaging in a “race to the bottom” leave you at risk of buying poor quality products, but it also might not represent the total cost of acquisition for whatever it is you’re buying.

So, instead of getting your procurement team to choose suppliers that offer the lowest cost per unit, get them to look at the total cost of purchase.

As well as unit cost, considerations should include:

  • Shipping and logistics costs
  • Storage costs
  • Return costs and how the potential supplier deals with these and reimburses you

Remember to factor in things like reliability and the potential for disruptions to get an accurate picture of which suppliers are likely to offer you value for money.

7. What payment terms are available - or what terms do you want to work with?

Payment terms can be a source of friction in any business contract. However, agreeing these are particularly critical in supply chains where you need to ensure supply continuity while ensuring optimal cash flow.

In general, you have two options here:

  • Within your “what does a good supplier look like” checklist, include clear time frames that you want to work within. For example, you might say that you’ll pay all invoices within 60 days of satisfactory receipt of products. You’d then look for suppliers to whom this would be acceptable.
  • Depending on your accounts payable team and internal procedures, you might be able to fit in with a potential suppliers’ preferred payment schedule.

If opting for the latter, you’ll still need written guarantees around product quality and other critical quality elements. You also should ensure that your suppliers won’t demand instant payment for goods currently on a container ship or in a cargo warehouse at an airport.

Decide how you want to work and choose suppliers who agree and fit within that framework.

8. Can they produce quality products?

Sometimes, it can be rewarding to work with suppliers new to your industry and go on your growth journey together.

However, if you’re focused on developing your brand and growing your business, it’s best to focus your efforts here rather than dedicating resources to doing the same for your suppliers.

Unlike asking questions about reliability or discovering whether a potential supplier follows ISO standards, you can determine if they produce quality products by getting the goods in your hand. If you’re selling the end product a supplier provides, get samples sent to you and assess whether they meet your requirements. If a supplier provides a component, you can ask what other products they supply parts for and look up things like those products’ defects or failure rates.

Once you define what “quality” is in the context of whatever you sell, don’t accept anything less.

9. What risks do potential new suppliers pose?

The truth is that all potential new suppliers pose some risk.

Even if you work with a supplier with a factory and warehouse in the same town as your flagship store, you will have risks for you to consider and mitigate.

The vital consideration here is for you to decide what level of risk is acceptable to your business and how you want to go about mitigating these. Another potential strategy is to tailor your new supplier search so that you 100% eliminate some risks.

For example, if you’re in mainland Europe, choosing nearshore suppliers means extreme weather in Asia, or incidents like the 2021 Suez Canal obstruction, wouldn’t affect you.

Before you start searching for suppliers, decide:

  • What risks you can tolerate
  • What you can do to mitigate such risks
  • Which risks you aren’t willing to accept

This step alone will whittle down your search for new suppliers and make it easier for you to create your shortlist.

10. Know where to look for new suppliers

Having a robust checklist of what you want in new suppliers won’t count for much if you don’t know where to find new suppliers.

Thankfully, you have plenty of options, including:

  • Our B2B network
  • Trade associations
  • Business directories
  • Your LinkedIn network
  • Industry exhibitions and events
  • Trade press

Finding suppliers to enhance your supply chain

Often, finding suppliers is difficult because businesses aren’t clear on what they want. As such, companies end up assessing proposals from potential suppliers that don’t fit their requirements or become inconsistent in how they evaluate their standards and working practices.

By layout out a robust set of guidelines for your procurement and sourcing teams, you will automatically focus your supplier search on high-quality suppliers that will enhance your supply chain and help you reach your objectives.

Discover how Serai can help you optimise your supply chain

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