Evaluating suppliers is a highly strategic task in any company, as it affects stock levels, final price and quality delivered to the customer. Thus, making mistakes in a supplier selection process can impair business results at several levels.
To avoid this situation, the ideal choice is to invest in a rigorous supplier evaluation process, tailored to the company’s specific needs. So we have listed the seven most common mistakes in corporate procurement, their impacts, and how to avoid them.
1- Requesting an incomplete quotation
A poor supplier assessment starts by requesting an incorrect or non-standardized quotation. If you ask a supplier to quote a certain quantity and then a different service to another, the comparison basis will be certainly wrong.
Similarly, sending an incomplete quotation (not including all the items you need) could mean paying more dearly at the end. Usually, the supplier can offer lower prices for larger quantities and, if you request an incomplete quotation, you won’t take advantage of that factor.
2- Evaluating the price only
With all quotations in hand, it’s time to select the suppliers. Although prices impact business profitability, it’s important to consider that the cheapest supplier isn’t always the right one. On the other hand, the most expensive supplier isn’t a guarantee of the best possible services.
Instead, it’s better to address issues related to quality, flexibility and delivery experience in that particular area. This will provide a fuller idea of how the provided service will be, and will prevent you from receiving something cheap, but very unsatisfactory.
Beware also of those not-to-be-missed offers. If the product proves to be of quality and the provider company is a large-sized one, a price far below the market’s may be a sign that there is something wrong.
3- Not considering all costs
It’s indispensable to remember that quotation values aren’t always the only costs involved in this process. Depending on the characteristics of your order and company needs, the amount may be a bit higher due to extra costs.
If a supplier is too far away from your plant, for instance, you may have to add shipping costs. So, considering that extra expense, that supplier who seemed to have more attractive prices can become far less attractive.
There are also other costs, such as possible taxes, along with specific expenses, to handle certain qualities of the supply. Look for proper information on all costs before making your choice!
4- Not aligning the processes
To avoid spending more than necessary, the supply process must really meet the needs of your business – not the other way round. Therefore, it’s important to align your processes as a whole.
It’s mandatory, for instance, to check what flexibility policy has been adopted by the supplier company. With such information, you can agree with the supplier about what can be done to achieve the best service conditions, without impairing the results of your business.
This is the right occasion to determine delivery times, ask for special payment conditions or request on-demand purchases. By aligning the supply to the needs of your business, costs will surely go down.
5- Ignoring supplier history
Another quite common mistake in supplier evaluation is to ignore their history. The fact that other companies had a positive experience with a given supplier doesn’t guarantee that your company will have it too. However, if such supplier isn’t recommended by the market already, there will probably fair reasons for this behavior.
So be sure to refer to other professionals in the area for recommendations about suppliers. Conduct a good survey on what other companies think about the supplier company of your choice. This will provide a clearer and early picture of how the supply relationship will be in practice, along with the weaknesses and problems that may arise in the process.
If possible, ask the suppliers to share their success stories and be sure to contact the mentioned companies. In this way, it’s easier to be sure that your choice will be the right one!
6- Not analyzing delivery capacity
It can occur that, when submitting a quotation, the supplier states that it can supply all the items you need. This may not correspond to reality however. Even if your business is protected by an agreement, the troubles caused by an incomplete process can adversely affect your business.
Therefore, before signing a contract, it’s important to check whether the supplier will be able to provide the promised quantities effectively. The ability to meet deadlines is also crucial. After all, there is no sense in the fact of a company being able to deliver the right quantity, with the ideal quality, but out of schedule.
7- Not looking for other suppliers
Last but not least, another common mistake in corporate procurement is the rush. This makes the companies evaluate only a few suppliers and then accept the first proposals.
The big problem in evaluating a few options only is an increased chance of wasting an exceptional opportunity. If your company doesn’t take advantage of it, perhaps the competition will do so – which means a disadvantage for your business.
So, the best thing to do is working with the broadest choice range possible. This precaution will also prevent your business from creating a dependency relationship with a single supplier. Have always in mind that there are big chances of finding other companies with the same quality and capability.
So how to do a good evaluation of suppliers?
Selecting the best suppliers is critical to the success of your business. Throughout the delivery period, you should also remember to evaluate the suppliers’ performance and if they meet delivery times. You can then develop an action plan to correct any possible problems.
To get the best results, you must qualify your suppliers. Always check the company’s reputation on external information bases. For such purpose, check the IRS, Sintegra, credit bureaus and other entities.
Keep your supplier data always updated, as this will avoid bad surprises in the future. In addition, consider the possibility of using the help of a specific automation software to manage your suppliers. With data from your business partners stored electronically, it will be easier to manage contacts and information, and even make RFQs with governance for your business.
By learning how to avoid some mistakes in the supplier evaluation process, you ensure that your company will be served by the best available professionals. It’s also a way to assess the quality of service that will be delivered to your customers.
Find also the importance of collaboration between buyers and suppliers and learn how process automation can help your business.