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How to Pick the Right Supplier

1/12/2018

 
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​The supplier selection process is an important and vital step for any size company.  Making the wrong decision leads to countless hours of wasted time and of course money down the drain.  A successful supplier selection process is even more important for small and start-up based business where financial considerations are at the top of the pecking order.

​When looking for a new supplier follow these steps to best position yourself and company for success:
1.Know What You Need Before You Need It
Two reasons this is important: 1st – if you don’t know what you need how will you be able to explain it to a supplier?  When we know what we need and therefore want we're better prepared to explain those needs while setting expectations for what a successful partnership and outcome looks like.  This minimizes miscommunication and opportunity for expectations falling through.  2nd - Waiting till the last minute to find suppliers often leads to decisions being made which may get you out of a momentary jam but leads to larger problems down the road.  For this reason it’s vital you are proactive in establishing relationships with vendors and suppliers.
 
2.Establish Minimum Expectations for Vetting Suppliers
Establishing minimum expectations means that you will vet all potential suppliers with the same list of needs, criteria and expectations.  This will help to create an even playing field when vetting suppliers and their capabilities.  Similar to #1, when you know what you want and have created a way to gather information which allows you to do equal comparisons your chance of making the right decision increases dramatically.  If need to create a checklist to hold yourself accountable to making the right decisions then by all means do so.
 
3.Be Strategic
Once you know what you need from a supplier it is important to think about other associated or cross functional activities which need to be done that could be accomplished by a single supplier.  The ideal situation is you find a supplier that can do more than just one component of your needs, therefore providing more value in the long run. This also saves time because you have less suppliers and vendors to managed increasing your efficiency and effectiveness.
 
4.Supplier Identification
Referrals, referrals, referrals.  Once you know what you need the best approach to finding the right supplier is by reaching out to others in your industry, or industry associations, to learn who they use, and just as important who they don’t use.  Take the time to read reviews, gather intel from people you trust before you start calling potential suppliers. While sites like Thomas.net and Google can provide this information it is likely you will quickly find yourself overwhelmed with information.  In the end the most useful data is those that are unbiased or comes from experience which is best collected from trusted resources.
 
5.Outreach and Selection
When speaking for the first time with a potential new supplier try to connect with the people you will actually be working with, not just the company’s sales person.  This is important because once the relationship is established the majority of your time won’t be spent with their sales people rather those delivering the service or product. What is their communication like?  Do they respond quickly and address mistakes immediately?  What is their customer retention rate? Find out how long their employees have been with the company too.  If the company suffers from consistent turnover that should be a big red flag as you will likely have to be much more involved with this supplier helping coach and direct new employees to ensure the work is done properly.  You don't want to be in a situation where you're training your suppliers new employees just so they can turn around and bill you for it.  Also, where are you in the pecking order of the level of importance to the supplier?  Don’t be fooled, not all clients are treated equal, even if they tell you otherwise.  When you know where you stand it is easier to build a relationship based on realistic expectations.  In the end, supplier selection should come down to three things, in ranked order:
  1. Performance
  2. Relationship
  3. Price

At the end of the day it doesn’t matter how affordable or cost effective a supplier is, or how nice they are as people.  If they can’t perform, and do so consistently, the other two don’t matter.  I’ve also found that paying a bit more for the right service and relationship often times is worth the investment it in the long run. 
11 Comments
James Lee Tucker link
6/1/2018 12:35:01 am

It's great that you talked about reading reviews and asking people to find a reputable supplier for your business. My friend works in an industrial plant, and he was assigned to purchase supplies for the company. I'll suggest that he goes online to find reviews of his potential suppliers or take referrals from people in the same industry.

Reply
Gary Puntman link
10/9/2018 07:35:01 am

These are great tips for businesses who are hiring any type of supplier. I especially like that you said you should set expectations for the suppliers. This will help you be able to compare different suppliers to choose the right one for your needs, like you said. Making a checklist is also a great idea.

Reply
Katie Wilson link
1/21/2019 03:48:08 pm

I agree that referrals are important when choosing an industrial supplier. Talking with other businesses and finding out about their suppliers would be really helpful. You may even want to use the services of a site like the BBB in order to know they are right for you.

Reply
Eli Richardson link
8/29/2019 07:57:23 am

My godfather will be opening his own business, and I want to help him find a supplier. It says here that it is best to read reviews and to ask people to find a reputable supplier. This will help us find the right company to supply my godfather for his business.

Reply
Travis
8/29/2019 09:08:15 am

Thanks for the reply. The more work you do upfront to understand your needs, what you want from a supplier and document it to ensure the one you pick is what you need will ensure you've selected the right relationship. Good luck Richard.

Reply
Eileen Benson link
10/11/2019 12:14:16 pm

It was helpful when you explained that minimum expectations need to be established for vetting suppliers. The company I work for wants to onboard new vendors and suppliers. Thanks for helping me see why the credentials of vendors should be thoroughly vetted by an onboarding service!

Reply
Skyler Williams link
10/28/2019 09:16:29 am

I appreciate your tip to know what you need before you need it. My brother just started a warehouse business and he told me he needs to order more cap screws. I'll pass this tip onto my brother so he can be prepared in the future.

Reply
Oscar @ environmental engineering link
1/23/2020 04:45:03 pm

This is a great list of tips. My cousin is planning to make a business, computer shop. the problem is she doesn't know where to find suppliers. I will tell her to read this

Reply
Kristofer Van Wagner link
9/6/2020 09:29:21 pm

You make an excellent point that it is important to ensure that a reliable supplier has authentic certification. The other day my sister mentioned her husbands' looking for a timber supplier. I will ask her to check for their certification before hiring them.

Reply
Megan Alder link
12/23/2020 08:18:13 am

It's great that you mentioned how important is to know what you need before meeting with a supplier. Otherwise, you won't be able to explain it to them. If I were to look for a supplier company for my business, I would enlist all the items that I need before contacting them. So, if there are any questions related to them, they can be answered quickly. I appreciate your tips on how waiting until the last minute to find a supplier can lead to a bigger problem in the future.

Reply
Adam Golightly link
1/14/2021 03:06:53 pm

I can understand how a business could really benefit from getting the right products for their company in order to be more effective. Making sure that they can get some help from a professional could allow them to be more efficient. It was interesting to learn about how their chances of choosing correctly could be increased by looking at equal comparisons.

Reply



Leave a Reply.

    About the Author

    Travis Smith is the founder and managing director of Square-1 Engineering, a life sciences consulting firm, providing end to end technical project services to companies which design, develop and or manufacture products in Southern California.  He successfully served the life sciences marketplace in SoCal for over 15 years specializing in engineering services, consulting, project outsourcing and leadership development. In 2019 he was recognized as a ‘40 Under 40’ honoree by the Greater Irvine Chamber of Commerce as a top leader in Orange County, CA.

    Travis also serves as Chairman, Board of Directors for DeviceAlliance, the only Southern California based medical device non-profit professionals organization and member of the University of California Irvine's Division of Continuing Education Advisory Board for Medical Product Development.  He holds a business management degree from California State University Long Beach and is a graduate of the Southern California Entrepreneur Academy.

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