Supplier Selection Criteria — The Ultimate Guide for Procurement Managers

Factors to Consider in Supplier Selection

When making and setting criteria for supplier selection and evaluation, you should, as a procurement manager, consider the factors and key elements that your organization is looking for. This will help define the overall supplier selection process and create accurate selection criteria that will fit the specifications and requirements of your procurement operations.

Here are some factors to consider: 

1. Price and Cost competitiveness

Despite the importance of quality, it is also important for organizations to strike a balance between effectiveness and cost. In view of the fact that it might entail compromising quality or service levels, selecting the most expensive supplier may be no longer a good option. Instead, businesses should seek suppliers who offer a price that does not compromise on quality and allows them to retain profitability while meeting their customers’ needs.

2. Capabilities

Another important factor is the capability of the supplier to meet current and future requirements. In terms of volume and timeframe, organizations have to assess whether they are able to meet their demands from the prospective supplier. Additionally, the evaluation of a supplier’s scale guarantees that they are able to cope with increasing demand as their market size increases.

3. Financial Stability

In order to avoid interruptions in the procurement process, it is crucial that suppliers are stable. For the purposes of determining their solvency, and for assessing all financing risks they may present, an analysis of prospective suppliers can be useful. It is more likely that long-term contracts are to be fulfilled and complied with by the financially stable supplier.

4. Location

Logistics, lead times, and shipping costs can be significantly influenced by the geographical location of the supplier. For businesses that rely on “Just Intime Manufacturing” or require swift response to customer demands, the assessment of proximity is critical. In contrast, in order to gain economies of scale or access to unique resources, some industries may prefer foreign suppliers.

5. Ethical and Social Responsibility

It is necessary for organizations to align themselves with suppliers, who adhere to ethical practices in an era of increased corporate social responsibility. Ethical policies, working practices, the impact on the environment, and sustainability commitments by suppliers should be examined by organizations. It is not only about enhancing a brand image but also mitigating the risk of negative publicity and potential legal problems by working with socially responsible suppliers.

6. Technological Capability

The key drivers of growth and competitiveness are innovation. An analysis of the provider’s commitment to innovation and its technological capabilities can reveal how it delivers cutting-edge solutions, as well as stays on top of industry trends. A supplier with an innovative approach could bring fresh ideas, improved processes, and new products to benefit both parties involved.

Criteria for supplier evaluation

We talked about how criteria set by the organization can be a deciding factor for a supplier to be chosen. Now, here are several criteria you or your organization can use to evaluate a supplier:

1. Price

A variety of prices is offered by suppliers for the same products. Monitoring of prices is often useful for identifying changes in market demands or availability.

2. Quality

Product quality is a qualitative measurement of how durable or effective the supplier’s product is. Samples for the purpose of evaluation of quantities may be requested prior to purchase.

3. Service

Before working with them, take into account an assessment of the service provided by a supplier. In addition, the criteria of service may include friendliness, responsiveness, and a comprehensive understanding of an enterprise’s needs.

4. Convenience

Convenience is important for businesses in need of frequent supplies. You might also evaluate how easy it is for you to order products, how quickly you get supplies, and how willing the supplier is to accommodate your employer’s needs.

5. Social Responsibility

Social Responsibility means that suppliers whose values and mission align with that of the company may be valued. The supplier’s involvement in society and contributions to charitable organizations may also be part of his or her responsibilities.

6. Risk

Understanding the risk can help you determine if your supplier is a good one, given that they are often relied upon to supply their customers’ products. You might analyze the risk of price increases or supply availability.

Softwareavailable for Managing Supplier Selection Criteria

1. Kissflow Procurement Cloud

Kissflow Procurement Cloud provides end-to-end procurement solutions to help with your procurement process. It also helps improve vendor relationships, thanks to the software’s ability to collect all vendor and supplier data into one platform. This makes it easier for users to set up their metrics. The product software is easy to integrate with other accounting tools, ERP systems, and other business software.

2. SAP Ariba

SAP Ariba is a cloud bases procurement software that provides spending management, and supply chain services that allow suppliers and buyers to connect and do business, worldwide. Provides other functions such as sourcing, contracting, supplier management, and payment management.

3. Precoro

Precoro is a full-fledged procurement software that eliminates manual work processes to save time, resources, and money. It is all about removing delays to make purchasing seamless and secure.

4. GEP SMART

GEP SMART supplier collaboration software is an all-in-one platform that simplifies the process of collecting, storing, sharing, and tracking supplier information.  It offers a range of tools to manage supplier relationships effectively, making it easier for vendors to provide data and for manufacturers to collect it.  The software automates data capture and standardizes communication, resulting in accurate information that promotes smooth collaboration between suppliers and manufacturers. Additionally, GEP SMART provides vendor collaboration dashboards, allowing suppliers to manage their profiles, catalogs, and pricing.  This feature reduces the workload and administrative tasks for procurement teams, enabling them to concentrate on essential supply chain operations.  With GEP SMART, businesses can streamline their supplier management processes and improve efficiency in their procurement operations.