Vendor selection is one of the most important decisions for businesses to make. Selecting a supplier is more than just finding someone to source products or services to build your business—it’s also about finding a partner who will work with you for years to come.
What Is Vendor Selection?
Vendor selection is the process of choosing the best vendor for an organisation’s needs.
When a business upgrades or scales up its operations, for instance, choosing the right vendor is a key step in ensuring that everything goes according to plan.
It’s not just about finding the right supplier to do the job, it’s also about choosing a partner who will grow alongside your business.
How To Look For The Right Vendor: Four Factors To Consider In Selecting The Best Vendor
Vendor selection can be an exceedingly complex task, which shouldn’t be a surprise given how long procurement contracts can last. For better or for worse, you’ll be working with them for the long haul. So how do you choose the best vendor for you?
A short primer on the typical vendor selection process:
You’ll have to analyse your business requirements and define your criteria before you start. Then you’ll have to compile a list of vendors to choose from, gradually narrowing the list as you go. The next step is submitting a Request for Proposal (RFP) or a Request for Quotation (RFQ) from each of the vendors on your list. Next, you’ll have to evaluate all the RFPs or RFQs you receive and make a final choice.
All that’s left after that is negotiating the final contract with your new vendor.
Four factors to consider during your vendor selection process:
Choose a Vendor That Aligns With Your Business Goals
To facilitate a long-lasting business partnership, your vendor must share your long-term business goals. No matter how good a vendor looks on paper, if their goals differ from your own, they won’t be able to provide you with the kind of service and support that your business needs to grow.
For example, construction vendor selection should always align with your construction schedule and business goals. Failing to account for this can lead you to suppliers that may be competent but can’t meet your timeframe or budget. Make sure that your vendor understands the bigger picture and can work toward achieving it with you.
Choose a Vendor Based on Industry Expertise
You’ll also want to choose a vendor that has experience with your specific industry. Word of mouth is generally a reliable way of finding well-regarded vendors in your area.
Leveraging your professional networks or supplier databases can be a great way of finding suppliers with the right industry expertise. It would be best to get referrals from your business network to get an insider’s view of your prospective supplier’s capabilities.
Your vendor must know industry trends to grant you access to the latest information and technology that your business needs. A supplier that understands the intricacies of your industry is more likely to anticipate your needs and provide better service overall.
Choose a Vendor Based on Quality and Flexibility
A supplier with quality control processes in place is also a supplier that’s more likely to deliver results. If you’re looking at supplier selection for food ingredients, it’ll be important for your supplier to have an established quality control process and certifications from organisations like the FDA.
You also want a vendor flexible enough to accommodate your requirements. Ask yourself: if you want to make changes, does the supplier have processes in place that will help them adapt quickly?
Choose a Vendor Based on Costs and Benefits
While going with the cheapest vendor is rarely correct, the same can be said about going with the most expensive supplier. In vendor selection, you want to find a balance between the two.
Be sure to account for all the benefits a vendor brings to the table.
Don’t overlook your vendor’s employees. Does your vendor provide them adequate training and support to do their jobs? These are the people you’re going to be working with every day, so the better they are at their jobs (and the more vested in your success), the greater value you’ll be getting from them.
Why Selecting Vendors Can Aid You To Be Competitive And Effectively Implement Strategic Procurement?
Ensuring that your supplier provides the best rates around can bring about cost positions 5 to 10% lower than your competitors—while decreasing your exposure to risks such as supply chain disruptions by 20 to 50%.
Not all businesses have the resources needed to implement strategic procurement principles.
Burgeoning companies have been able to level the field using Artificial Intelligence (AI), allowing them to pore over the entire global market for procurement contracts, tech providers, and other service solutions.
AI can help procurement professionals by suggesting the best value contract terms to satisfy your business goals. The speed and accuracy of vendor selection with AI benefits all businesses, most notably in industries that reward cutting-edge tech innovation.
Building And Maintaining Lasting Partnership
Like any relationship, vendor relationships need a lot of planning and hard work to ensure they last—as well as lots of time.
Look for vendors with open communication lines, so you can be clear about your needs, expectations, and deadlines, as well as allowing for feedback on any concerns or problems that may come up.
Treating your vendors as partners requires you to move away from a transactional relationship.
Transactional relationships are just that: transactions, deals, or deals made between two parties. In a transactional relationship, there is no trust and the focus is on getting the most benefit from the transaction as possible.
In contrast, treating vendors as partners means establishing long-term relationships in which you and your vendors move in concert toward the same goals.
The short-term savings you may get from cutting corners or taking the cheapest option are not worth it in the long run. Working with vendors who have an interest in ensuring your project’s success means that they will go above and beyond—strengthening both businesses and your long-term relationship.