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Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Selecting a Vendor — The Ultimate Guide of 2024

Key take-aways

  • Vendor selection is a critical process in procurement that involves choosing a supplier or vendor for goods and services.
  • A vendor, also known as a supplier, is an entity in the supply chain that sells or provides goods and services to companies or organizations.
  • Strong vendor relationships are crucial for customer service, quality, cost efficiency, and market development.

Selecting a vendor is not an easy task for each organization. It requires a lot of factors before choosing a potential supplier. In procurement, the procurement department of each organization has its way of selecting a vendor. 

In this article, we will discuss some tips on how to select a vendor. We will look at the factors that affect the selection process of the vendors. Additionally, we will talk about the importance of selecting the right vendor for the organization. 

After you finish this article, you can now implement some tips in selecting a vendor in your organization. This will allow you to choose a vendor to help the organization achieve its goals and objectives. 

What is a Vendor?

For those people who just started their journey in procurement, a vendor is a general term that describes any supplier of goods and services. It is also known as a supplier. 

A vendor is an entity in the supply chain that sells or provides goods and services to companies or organizations.

The term vendor is commonly used to describe an individual or business that is paid for goods that are provided rather than the entity that manufactured the goods. However, it is possible for a vendor to be a supplier of goods and a manufacturer.

    The Importance of Vendor Relationships

    We are taught that by having great teamwork, anything is achievable. The same is true in the field of procurement. Without access to raw materials or services, an organization cannot operate.

    Establishing and maintaining a strong vendor relationship is important to customer service, quality, cost efficiency, and market development. 

    Having a strong relationship with your vendor can prove to be beneficial in numerous ways:

    1. Cost Savings

    When you have built a connection and you give importance to your relationship with your supplier, your vendor may offer the organization discounts and special deals. 

    2. Vendor Support

    The vendors are more prompt to respond due to the relationship you have built with them. Additionally, they are more likely to go beyond just to fix your problem. 

    3. Customization Opportunities

    Due to the fact that the vendor understands the nature of your business throughout the years, it might be able to provide you with unique products that can create a competitive advantage over other organizations. 

    4. Timely Deliveries 

    For the organization to meet the demands of the customers, the things that it needs should be on time. 

    Due to the relationship that you have built with your vendor, it is more likely that they will prioritize you and deliver the goods ahead of time. 

    5. Customer Satisfaction

    A strong relationship with your vendors can also impact another relationship. Due to the fact that you are able to deliver the goods on time with no defects, the customers will be satisfied. This will make them happy to do business with you and can foster loyalty and trust. 

    The above-mentioned benefits are not gained overnight. You must take note that strong relationships with your vendors are cultivated through time and the efforts of both parties to maintain a good relationship. 

    Things to Consider When Selecting a Vendor

    Here are some things that you may want to consider when selecting a vendor.

    1. Price

    The goal of every organization when procuring materials is to get the maximum value for the lowest possible price. In order for the organization to know that it is getting the best deal, it needs to ask for more than one bid. 

    The organization must be wary of vendors whose pricing is far lower than others. The price might be low but so is the quality of materials. In addition, you may end up paying more than the estimated cost that is not stipulated in the quote. 

    The organization must communicate the full prospect of what it needs to receive an accurate bid. The organization must stick to its requirements and not just fall for the low price. 

    Additionally, the organization must read the quote or the proposal carefully to check if there are some hidden fees. In the case of complex contracts, it is worth it to invest in an attorney to review the stipulations in it. 

    2. Quality

    Price is a great factor in choosing a vendor. However, if the quality is poor, then you should think twice about choosing that particular vendor. 

    If applicable, you need to ask for some samples of the vendor’s previous work. This is to check if the materials will suit your requirements. 

    Procuring materials of poor quality will cost you more and it will also affect the satisfaction of your customers. 

    3. Customer Service

    The customers won’t lie about the experience they have with your potential supplier. You can ask their previous customers about their experience, especially the service of the vendor after the sale. 

    You can use the internet to find some reviews of your potential vendor. People who have poor customer service may vent their frustrations on the internet. Uncovering this may give you insight if it is the right vendor for you. 

    4. The integrity of the vendor

    The organization should try to learn a little bit about its potential vendors on how much importance they put on operating with high ethical standards. 

    When selecting a vendor, you must check the internet if the vendor has had any issues before. This will allow the organization to keep its reputation and have a good standing in the eyes of its loyal customers. 

    5. Professional Employees

    When a vendor represents an organization, its employees do too. It is important to check the attitudes of the vendor’s employees toward your customers. 

    People skills are important for an individual to appropriately present himself to others. Some customers will see employees as an extension of the attitudes of the company. 

    6. Recommendations from other people or businesses

    If all the factors are equal in selecting a vendor, you can rely on word of mouth from the other professionals in the field. 

    Professionals and other businesses will share honest opinions about the potential vendor you will select. This will allow you to select the right vendor for you.

      What is the Vendor Selection Process?

      The vendor selection process is a sequential procurement step that enables you to determine the product or service requirements and match them with the supplier’s capabilities and pricing. 

      The vendor selection process includes searching for potential suppliers, sending quotes, supplier evaluation, negotiation, and contracting.

      Why is it Important?

      The vendor selection process is crucial for companies as the evaluation will help them avoid low-quality and fraudulent suppliers. Through the vendor selection process, companies gain better terms and reasonable pricing due to competitive bids. 

      Additionally, the vendor selection process ensures companies that their suppliers are financially capable and can deliver the products on time to meet your requirements. 

      What are the Steps in the Vendor Selection Process?

      The following are the steps in the vendor selection process:

      • First, you must consider using an e-procurement system
      • You must determine the needs of the company before you send out an RFI, RFQ, or RFP to solicit bids
      • Check your company’s approved list of suppliers
      • Find any other potential suppliers that you think can meet your requirements
      • Use your company’s criteria list to assess and select a supplier
      • Narrow down your list to know the most qualified supplier
      • Check their proposals and demos to know how well can the supplier meet your requirements
      • Find multiple customer feedback about your potential supplier to know their past performance and if they have a high level of compliance
      • Check the financial stability of your potential supplier to identify if the supplier can meet your demands
      • Negotiate terms, discounts, prices, and delivery dates with your potential supplier
      • Contract with your selected supplier


      Effective vendor selection is essential for achieving organizational goals, ensuring quality, and maintaining strong relationships. By considering various factors, implementing recommended tips, and following a structured selection process, organizations can make informed decisions that contribute to their success.

      The vendor selection process is not just about cost but involves a comprehensive evaluation to secure reliable, ethical, and capable suppliers.

      Frequentlyasked questions

      What is a vendor?

      A vendor or a supplier is a general term that describes any supplier of goods and services.

      Why is it important to choose the right vendor?

      It is important to choose the right vendor as it can greatly affect the operations of the organization and its profitability.

      How do I select a vendor?

      In selecting a vendor, there are many factors to consider such as the price, quality, integrity, and employees.

      About the author

      My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

      Marijn Overvest Procurement Tactics