Supplier selection

In the same way as the conclusion of a contract or prospecting, the selection of suppliers is one of the key factors in the profitability of a business. This is an important decision that must be made when starting or growing your business. Indeed, although they are not part of your entity, suppliers are guarantors of your overall performance. They participate directly in the smooth running of your business by ensuring the quality of the final product, the pace of manufacture and the satisfaction of your customers. As such, The choice of suppliers should not be left to chance. It is important to ensure the quality of supplier selection process. Procurement managers have a crucial role to play in this process. In this article, find out everything you need to know about selection of suppliers. Why is it important to choose the right suppliers? What are the criteria for selecting a supplier? What are the different steps in choosing suppliers?

Why is it important to choose the right suppliers?

The survival of a business depends essentially on two factors: customers and suppliers. There is a tendency to believe that customers alone are enough to guarantee the profitability of a business. It's not true! La selection of suppliers It also plays a major role.

Operating in increasingly competitive and complex markets, companies must surround themselves with quality partners to obtain a competitive advantage through innovative products, good reputation and better customer satisfaction. The good choice of suppliers allows you to get there. The quality of the services or products you offer, and thus the satisfaction of your customers, is closely linked to your suppliers. The research and selection of suppliers should not therefore be overlooked. Not only does it ensure the continuity of your activities. It also impacts your brand image and your turnover.

Buyers' concerns when choosing suppliers

The choice of suppliers is one of the most important tasks for buyers. Indeed, one of the main objectives of Purchasing departments is to secure the supply chain and to maintain and improve supplier relationships. To achieve this, they must carry out various missions, including sourcing, which includes research, evaluation and selection of suppliers.

The concerns of suppliers during the choice of suppliers have changed a lot in recent years. In the past, the main criteria that motivated them when looking for suppliers were the optimization of quality, the reduction of costs, financial security, compliance with deadlines, the adaptability of suppliers and the sustainability of the relationship. Today, other factors come into play, namely the supplier's innovation potential and CSR.

What are the criteria for selecting a supplier?

As mentioned above, the selection of suppliers is an important step to guarantee the quality of the company's services or products, customer satisfaction and the good management of the company's activities. Whether it is a supplier for strategic purchases or class C purchases, it is important to choose the right supplier to be sure of creating a quality and lasting partnership. To find the best suppliers, several criteria must be taken into account. Here are the main ones supplier selection criteria :

Traditional criteria

• The price : the price is obviously among the first criteria for selecting a supplier. It has a direct impact on the company's profitability and margin. Attention, do not stop at the direct cost of the purchase. There may be hidden costs or ancillary costs, such as delivery costs, packaging or packaging costs. It is therefore necessary to take into account the overall cost of ownership, that is to say the cost that a purchase will generate throughout its life cycle. This includes the purchase cost, but also the costs associated with the use, care, maintenance or recycling of the product.
• Deadlines : we are talking here about two types of deadlines: the delivery time and the payment term.

Respecting the delivery deadline is very important. Indeed, a delay in delivery can have serious consequences on the company's activities. If the product is an important part of production, failure to meet the agreed deadline may suspend the entire production process. It is therefore necessary to choose suppliers who are able to meet deadlines and deliver quickly. Geographical location plays a key role.

The payment deadline is another important criterion to take into account when choice of suppliers. You need to negotiate longer deadlines while respecting current regulations. This allows you to get more flexibility in your cash flow. This is especially true if buying is an important part of your operating cycle.

• The quality : the verification of the quality of the products or services provided by the supplier as well as its qualifications is essential during the supplier selection procedure. “Quality” references, such as certifications, labels, standards, etc. can help. These are all guarantees on the quality of the provider's products or services. You can also rely on customer reviews about it and information on comparison and rating sites. They can give you clues about the quality of the supplier.
• The financial health of the company : before signing a contract with a supplier, remember to check their solvency. The financial health of a supplier you deal with can have a significant impact on your supply chain. Indeed, if it fails during the contract, it could disrupt the supply cycle. Thus, find out about the financial health of a provider (financial results, cash flow, group membership...) before engaging with him. Also, don't forget to check if there are any ongoing court cases. You can use legal information sites, like... to get this information.
• The reputation and reliability of the company : upstream of supplier selection process, it is also worth asking about its reputation and reliability. This involves taking into consideration the famous QCDs (quality of the goods, cost and time), but not only that. It is also necessary to check whether the service provider embodies the values and beliefs of your company. A supplier that has a bad reputation, for example, because of their practices and methods, can tarnish the image of your business. So, before you commit yourself, check whether its values are consistent with yours (respect for the environment, responsible purchasing, non-discrimination, fight against corruption, etc.). Conduct your own investigation to find out what other customers think of him. Check to see if he is not on any sanctions list or has not been the subject of negative press. Also remember to check that the provider does not derogate from any rule or law in force. With the Sapin 2 law and the law on hidden work, companies are increasingly being monitored in relation to their suppliers. We must therefore remain vigilant about their methods and their compliance with the laws in force.
•  Associated services : some types of purchases, such as technical and technological purchases, require follow-up after the sale. It is therefore necessary to give priority to suppliers who can provide associated services (after-sales service, troubleshooting, technical assistance, etc.). These services may incur additional costs. You have to remain vigilant about these costs.
• Hidden intermediaries : during the supplier selection procedure, it is also important to check the number and quality of hidden intermediaries, i.e. third parties involved in the supply chain, as they are likely to have an impact on the company's activities.

Note:

During the supplier selection process, it may be useful to use a supplier selection grid. It is an evaluation grid that makes it possible to analyze suppliers' offers and facilitate decision-making.

Modern criteria

Every good buyer should know that. Today, we are no longer satisfied with traditional criteria for success. the selection of suppliers. New factors must be integrated into the process, in line with current reality. These criteria include:

• Innovation : the degree of innovation of an offer can also make all the difference during Choosing a supplier. Choose service providers whose value proposition is based in part or entirely on innovation. To do this, ensure that the specifications encourage them to come up with innovative solutions. These can bring real added value to your business.
• Environmental and social criteria : these criteria will be all the more important if you have decided to implement a responsible purchasing policy. Indeed, all entities, whether private or public, are now encouraged to integrate CSR into their overall policy, and in particular in their choice of suppliers. Among other things, it is a question of verifying the origin of products, raw materials, production and shipping conditions, etc. In the eyes of customers, companies and their suppliers are linked. If suppliers have a bad reputation in terms of their social and environmental responsibility, this will inevitably have an impact on the company's reputation. Thus, do not hesitate to hold the supplier to account, or even to travel to carry out audits if necessary.

Supplier selection process: the steps to follow

The supplier selection and evaluation process current or potential suppliers follows a “funnel” principle, i.e. a gradual selection of suppliers based on defined criteria.

Targeting for supplier selection

Targeting for supplier selection consists of a preliminary sorting of market suppliers using simple and objective general criteria such as the size of the company, geographical proximity, specific prohibitive constraints, etc.

This step does not require direct contact with suppliers.

Pre-selection

Among the target suppliers, select those that meet more specific requirements.

Most of this information can only be obtained by interviewing suppliers on the basis of an ad hoc questionnaire, otherwise known as RFI (or Request For Information).

The analysis of the questionnaires will make it possible to establish a list of potentially suitable suppliers.

Assessment

Supplier evaluation is sometimes referred to as “qualification”, “certification”, “certification”, “approval” or even “referencing”.

The objective is to assess current or potential suppliers on a number of aspects, and to decide whether they will be part of the list of searchable suppliers.

Supplier evaluation:

The profile of the company and its intrinsic capacity to meet your needs. The aim here is to verify the responses to the RFIs by means of an audit at the supplier.

This audit will seek to assess the distinctive competencies of the supplier's value chain. It may be completed by a technical audit of the process in question.

• Level of expertise correlated with their level of competitiveness
• Economic dependence on your business
• Level of motivation to work with you over the long term
• Financial health

The list of available suppliers corresponding to all suppliers deemed suitable is established at the end of this evaluation.

These suppliers may enter into a recurring consultation dynamic and be the subject of a framework contract.

It also makes it possible to have a good assessment of the external risks represented by the market and its suppliers.

• What questions do you need to ask yourself?
• What information is required to create the list of suppliers for the tender?
• What are the specialized websites providing information on the supplier market?
• Which suppliers have already worked with the company?
• What are the sources of internal market information and what are the constraints and opportunities for the company to work with them?
• Who are the most efficient suppliers on the market and what are the constraints and opportunities for the company to work with them?
• Who are the new market entrants? What are the substitutes and innovations offered on the market?
• Do the suppliers on the shortlist cover all the needs expressed by the company?
• Is the number of pre-selected suppliers consistent with the competitive effect you want to create in the tender?
• Isn't the list of suppliers too long compared to the Procurement resources planned to process the tender?

To find the right suppliers, it is necessary to develop a method of supplier selection effective. You can streamline your supplier sourcing by opting for a powerful digital tool, like Sourcing Force.