Supplier Selection and Supplier Appraisal

Choosing the right supplier is critical: the products you buy make up between 40% and 60% of end product sales and have a direct impact on cost and quality. Even a small cost advantage gained by selecting a good supplier can have a big impact on the available budget.  This can make a significant difference when you are working with the public sector.

Supplier selection is the process of selecting a supplier to acquire the products and services your organisation needs. Suppliers are selected by assessing their capabilities.

Steps to the successful selection of suppliers include:

• Consider what you should look for in suppliers: some of the most common attributes are quality and reliability, speed and flexibility, value for money, strong service, clear communication and financial security.
• Investigate the pool of potential suppliers. This can be based on recommendations or information provided by directories, trade associations, business advisers, business support organisations, enterprise agencies, or exhibitions.
• Produce a shortlist of suppliers.
• Choose a supplier: this can be done by interviewing potential suppliers.

Supplier appraisal is an assessment of supplier’s capabilities. It helps to establish whether a supplier can deliver on quality, quantity and time as well as other contractual requirements. Before any supplier is added to a buyer’s database and given purchase orders, they should pass an appraisal.

The appraisal should consider a number of factors. These include:

• Does the supplier have the capacity to deliver the products or services you need?
• Is the supplier committed to meeting your quality standards?
• Is the supplier in a good financial position?
• Is the supplier offering a fair price, including transport and packaging?
• Is the supplier ‘green’ and doing their best for the environment?
• Does the supplier share your corporate values?

Standards can also be included in the appraisal. If the product that is being sourced has a direct standard associated with it, the buyer can establish whether the supplier conforms to it.

Supplier appraisal may take a considerable amount of time. However, money invested in the appraisal process is well spent as it helps to protect your organisation from risk and the costs that could come with it.