Why Companies Employ Time and Resources to Evaluate and Select Suppliers
Companies should take time in analysing and evaluating suppliers to make sure that the chosen ones offer the best services and will make it possible for their products to get to the end consumer in the fasted way possible (Hugos, 2003). It is in good faith for the companies to choose the suppliers who offer the highest value. In most instances, those who offer the highest value will make it possible for the company to clear inventory as far as new products are concerned. In this light, the company will be able to sell more of its new products, increase revenue and also increase customer satisfaction. Earlier, selection of suppliers took so much time leading to an increased amount of time taken for the products to get to consumers as compared to now. If the selection process takes place in a right way and faster, it will save the company time and resources.
Identify When Supplier Evaluation and Selection Decisions Typically Occur
In most instances, a supplier is sourced when there is a new product (Hugos, 2003). A new product needs spark the need to look for suppliers. It is hard to source a supplier for a product when it is still in development due to product issues.
What makes companies reduce the time taken to develop new products?
Most companies are now reducing their product cycle due to various reasons. First to increase profitability and enhance the sustainability of the company (Chopra & Meindl, 2007). If the company can always introduce new products that consumers can buy, or updated versions of older products, the companies can still generate revenue and meet growth prospects. Secondly, competition from other companies in the same market makes them reduce their product lifecycle. The other reason is that new found technology has made it possible for different companies to innovate and, therefore, reduce the amount of time taken to produce new products. Lastly, companies are taking a shorter time due to increased consumer demand for consumers who are always impressed by change and innovation.
The process to follow when negotiating supplier agreement with different suppliers
1. Identifying the supplier
Before a company can narrow down a supplier, it should source relevant information on which ones to pick. Those involved in the brainstorming exercise should include the managerial team or the stakeholders. At this point, it is important to evaluate their price points and capabilities.
2. Measure the performance of different suppliers
Those selecting the suppliers should come up with a programme aimed at assessing the capabilities of different suppliers through performing auditing and necessary due diligence.
3. Quizzing the selected suppliers and gaining feedback.
At this instance, clarification is made possible before the company can commit. A self-assessment questionnaire is important because it identifies gaps in the suppliers performance while at the same tie understanding their operations.
4. Get a quotation
After choosing a right supplier, get a quotation on what they would charge for the supply and their capacity.
5. Agree on terms and conditions.
If the quotation is substantial and meets demands, the company should then proceed to show its stand and sign contractual agreements with the said supplier.
Ways to reduce supplier selection
The first instance that will make the supplier selection process short is if the company commits to select suppliers during earlier development times of a product (Chopra & Meindl, 2007). Opting to select suppliers after a new product is tabled lengthens the time taken for a product to get to the end consumer. Secondly, the companies should reduce the entire step of identifying a supplier. Rooting for new suppliers is always hard and, therefore, a company can make this easier by reaching out to suppliers it had already worked within its catalogue. This will work towards reducing time since they already have a relationship with these suppliers. The third process is through making the comparison process a lot quicker than it should be. In this light, the companies can employ supply chain managers who are experts at sourcing, comparing and finding the best suppliers. Lastly, the entire time taken for quizzing, getting feedback and offering quotations should be fastened to make the whole process faster.
Chopra, S., & Meindl, P. (2007). Supply chain management. Upper Saddle River, N.J.: Pearson Prentice Hall.
Hugos, M. (2003). Essentials of supply chain management. Hoboken, N.J.: John Wiley & Sons.