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How to decide on the perfect provider for my firm

Among other things, price and quality are of decisive importance for the selection of a supplier.

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August
18, 2019

5 min read

This article has been translated from our Spanish edition using AI technologies. Errors can occur due to this process.

It is a fact that no company can exist without inputs and therefore without suppliers. While some suppliers are not critical, others are critical as they affect the company's financial results.

Negotiation is a key factor in getting high quality products at a good price. For example, strategic alliances and agreements allow us to get a special price per volume.

There are many factors to consider when choosing a supplier: price, payment terms, quality and service. Before making a decision, it is important that we strive for a balance between these components.

It is of no use to us to get a good price if the quality is not good, as this will in the short or long term cause the quality of our product to decrease and sales will certainly decrease.

A correct selection must be preceded by 4 phases, which you must carry out very carefully using the formula explained below. Only then do you make sure you make the best selection!

1. Information search

Some of the sources of information you can use to find vendors include:

– internet
– Press for general information

Radio and televisionPublications specialized in the activity of the companyPublications and reports from banks and savings banks Trade fairs and exhibitions specializing in the sectorShops and professional associationsChambers of commerceDatabases of public bodies (ministries, autonomous communities, town halls, universities, official bodies, etc.) Information Obtained from companies that specialize in database management. Internal sources of the company itself, such as specialists and technicians for the products

2. Request for information

In addition to the information you can collect through the above means, you will need to make a request for information. This action is very useful for establishing initial contact with potential suppliers. The most common ways to develop this stage are:

Visits from sales representatives. Interviews with vendors and manufacturer representatives can be one of the most valuable sources of information. Get as many salespeople as you can. It is important to develop good relationships with suppliers that start with a friendly, courteous, and open attitude towards the person in charge of the sales representative. This is the most productive source as you can speak, listen, and ask about attributes like price, quality, the other companies they are supplying, and more directly. Visits to supplier companies. In some cases, a purchasing representative may visit a potential supplier to form an opinion by directly observing the equipment and personnel. It is considered solid practice to conduct such visits as a team with technical and financial experts when a more comprehensive assessment of a company and its products is desired. Information request letter. It is useful that the suppliers know in the letters sent or in the negotiations the criteria against which their offers are evaluated.

3. Evaluation and selection

This implies a comprehensive investigation of the possible suppliers and their successive elimination based on the selected selection criteria until the number is reduced to a few suppliers. With the information you collect in the selection process, you need to do the following:

A file for each supplier to create a file that reflects the characteristics of the items each supplier can supply and the terms of trade they offer. A comparative ABLE c that reflects the terms and conditions offered by all suppliers in terms of quality / price and payment, discounts, delivery, etc., which are used to conduct a comparative study with all the information collected.

4. Selection

Once a comparison table has been drawn up with the characteristics of the offers from all selected suppliers, we will proceed to the selection of the supplier who will offer the product and the terms that best suit the company's requirements.

When selecting suppliers, economic and quality criteria are generally used, whereby a combination of both can be used.

Economic criteria. The selection is made taking into account the price of the items, the trade discounts, the payment of the costs incurred (transport, packaging, loading and unloading, etc.), the discounts for the purchase volume (abseiling) and the payment terms.

The supplier with the lowest final price is selected. If two products meet the same economic conditions, the product with the highest quality will logically be selected.

Quality criteria. If, at the time of selection, the supplier attaches great importance to the quality of the items, then he must undergo a careful comparative study of its technical characteristics, analyze samples, carry out tests, etc.

This criterion is used when the priority in the company is to get a product of a certain quality that doesn't necessarily have to be the best, but that interests the buyer at the time.

However, remember that the cheapest deal is not always the most convenient. Aspects that are not directly related to the products, such as customer service, warranty period, image that the product and the supplier have on the market, or the availability of customer services, can also be regarded as quality parameters.

Don't forget to consider the supplier's reputation, location, facilities, technical strength, financial standing, and organizational and administrative level.

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