10 Key Questions for Effective Supplier Selection

10 Key Questions for Effective Supplier Selection

E-procurement is sometimes accused of making supply chain questions only about dollar signs, but at Procurehere we know that great relationships go deeper than just unit price.

Supplier selection is an essential part of a successful procurement function, so here are X key questions to ask suppliers to help inform your decision-making process.

Do you understand our business?

The more a supplier understands about your business, and the industry in which it operates, the better potential fit they offer for your needs. Demonstrable knowledge of your operational model and market circumstances means they recognise your needs today, and understand how to work to support those needs in the future.

How fast can you respond to changes in demand?

Speaking of changing needs, it’s important to understand the ability of potential suppliers to respond to changes in demand. If you’re a business with ambitions to grow, you don’t want to be bottlenecked by a supplier who is simply unable to respond to consequential growth in demand for key supplies.

What are your terms for payment, and are they flexible?

Standard payment terms aren’t set in stone. Understanding the expectations of your supplier, and being able to negotiate to best fit for your own business needs, can be a huge advantage. Don’t just focus on extending the payment period, work out whether you can negotiate a discount for advance or fast payment.

Under what circumstances might price of goods change?

Just like demand isn’t static, neither sadly is unit price. It’s best to have a good handle up front on what fluctuations might impact the price of goods or services your supplier is providing, and what are the possible triggers for passing that cost onto your business.

What quality control procedures and liability insurance do you have?

Procurement professionals recognise the need to consider quality of goods just as much as price. Explore with potential suppliers the quality control they have in place, and how and when that is undertaken.

Equally, it’s important to realise that even the best QC procedures can sometimes miss a defect. Discuss with suppliers what liability insurance they might have, and how that might apply to you in the event of receiving faulty goods or services.

At what stage does ownership of the goods transfer?

Critical to understanding liability is a clear recognition of when full ownership of goods and products are transferred. Is it when the lorry rolls into your facility, when the goods are unloaded, or after a predefined time period?

Clarifying the point of transfer raises discussions around inspection of goods and grace periods for detecting faults or errors.

What is your policy and procedure for failure to deliver?

Even the most reliable supplier sometimes falls afoul of circumstance. In the worst-case scenario this can mean a scramble to source critical goods at a premium from alternative suppliers. Is your established supplier liable for a fixed penalty, consequential losses, or some other reimbursement? It’s best to understand this at the start, rather than desperately trying to work backwards in the event of a missed delivery.

Would previous clients recommend you, and why?

It’s good to hear in a supplier’s own words just what it is they feel they offer their clients. Let’s face it, a supplier is almost certainly going to reply ‘yes’, but it’s a great conversation starter to explore who those previous clients might have been, and what the supplier feels they did successfully for them. You can always do a bit of follow up research yourself with noted clients if you want to.

What’s your approach to communication and account management?

Some suppliers might be hands on account managers who follow up every order, others can tend more towards a responsive attitude to dealing with issues as you raise them. The style of communication and account management that works best for you could well be different, so ensure you’re on the same page with a supplier on how and when communication is undertaken.

What are your sustainable credentials?

A final consideration beyond unit price and quality, is the potential sustainability of your supply chain.  We’ve talked before about the growing importance of sustainability for your procurement function, and taking time to understand a supplier’s green credentials can help build a positive business case for your own sustainable practice.