How to choose a supplier

Choosing the right supplier is one of the key factors for successful business. Uninterrupted supply of necessary raw materials and materials depends on suppliers.

To select a supplier, there are a number of well-developed methods. Which of them to choose the company should be decided independently.

Rating Method

The rating method is the most popular when choosing a supplier. The analysis is carried out in several stages. Initially, it is necessary to develop a list of criteria for selecting a supplier, and then determine the specific gravity (significance) of each of them on a ten-point scale. The criteria may include price, reliability, quality of the goods, the provision of deferred payment, the possibility of supplying large quantities of goods, the financial condition of suppliers.

The criteria depend on the type of product. In the conditions of unified quality characteristics of goods, price parameters come to the forefront, while uniqueness and exclusivity - reliability and uninterrupted supply.

Next, each supplier is affixed with a ten-point scale for each parameter. Then they are multiplied by the specific gravity and added up. It turns out the final score for the company. Such operations are performed with each applicant for the role of supplier. Based on the points received, the most optimal partner is selected.

This method only from the outside seems extremely simple. In practice, serious difficulties arise that are associated with a lack of information for making objective assessments. Also, the working conditions declared by suppliers may differ from the actual state of affairs.

Cost estimation method

According to this method, a supplier is selected from whom the purchase of goods (raw materials) is associated with the lowest costs and is most profitable. For each supplier, all possible costs and revenues are analyzed. This, for example, transport, marketing, insurance costs, etc. In this case, logistic risks are taken into account.

We can say that cost estimation is one of the types of ranking method. Only here are price criteria analyzed more deeply.