5 key factors for organizations to consider while choosing the right suppliers

Procurehere News • July 08, 2020

Organizations engage with suppliers to procure various goods and services to maximize business performance. Suppliers are an important part of any business, and hence, managing suppliers is crucial.

Supplier management refers to the process that ensures value is received for the money that an organization spends with its suppliers. In this sense, building supplier relationships means thinking about procurement in terms other than the mechanics of purchase orders and contracts.

Traditionally, suppliers are chosen by organizations based on cost and they tend to chop and change to obtain what they view as the best price for the required products or services. However, most of the time this is not the most efficient way of doing things, since searching for and arranging contracts with new suppliers tends to incur added cost. From a long-term perspective, costs may add up due to poor quality control and order fulfillment thus making any initial price-based saving unsustainable.

Here are 5 Key factors for organizations to consider while choosing the right suppliers:

1. Sourcing suppliers

Inter-connective e-procurement platforms are the best way to locate suppliers. Using platforms reduces sourcing time and opens a larger pool of suppliers for businesses to choose from. Thus, reducing time and cost.

2. Cultural fit

Organizations need to ensure the supplier’s mission, values, goals, and company culture are aligned to their organization’s culture ensuring long term strategic partnership.

3. Reliability

It is crucial to determine whether the supplier is experienced and reliable. Suppliers must have industry expertise and know-how so they can value in project delivery and execution.

4. Consistency

In-depth reviewing of the supplier project portfolio as part of the due diligence process is crucial. Even though it’s a basic requirement but a lot of organizations tend to only conduct surface-level verification. The quality provided by suppliers needs to be consistent as it generally carries a significant impact on the overall project deliverable. Efficient supplier management platforms provide supplier rating features to optimize supplier base with the highest rated to lowest rated suppliers based on supplier’s past performances.

5. Location

Now more than ever, location is becoming important when choosing the right supplier. Dealing with distant suppliers might result in longer delivery times and added fright cost especially during current turbulent times. Development of local supplier networks alongside overseas supplier pool would give long term benefits to organizations and the overall local economy.

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