Sourcing and Supplier Selection
Definition:
Finding suppliers who will meet your production needs and supply a product or service to your customers, and determining which one provide maximum value.
What it is: Sourcing and supplier selection is the process by which you find the available suppliers who will meet your needs and select which one will provide maximum value.
What it does: Finding the supplier makes it possible to produce your product, and selecting the best supplier will save you money and reduce problems for you and your customers.
Uses:
How it is used: When you develop a new product, you need to find suppliers of the raw materials you will need. There are also times when the current suppliers either do not meet your needs or do so at a cost you are unwilling to pay. There are also day-to-day supplies and services that are used within your company and purchased from vendors and suppliers.
Where: Most suppliers are required to supply raw materials to manufacturing facilities, but office supplies, cars, and equipment are also used outside the manufacturing site.
Why: Purchasing from unreliable or costly suppliers can make you non-competitive in the market. Having good relationships with reputable suppliers can help your company run efficiently and effectively.
Limitations:
Where it shouldn't be used: When the cost is low or the frequency of purchase is rare, then a quick purchase from an available supplier is adequate. The entire selection process would not be cost-effective.
Any restrictions: Be sure to use suppliers that meet your company's requirements.
Warnings: Just because a supplier has a low cost does not make them the best supplier. You need to know that they can deliver what you want, when you need it, with the specified consistency and reliable delivery. Be sure they meet all of your needs, not just a low price.
Demonstrations:
Step-by-Step Process:
Identify need: What do you need to produce or what supplies do you need in your company? This includes the list of things you need to buy and what kind of a purchasing relationship you will need.
Transactional purchase: This is a one-time purchase that will not be repeated. These purchases are generally smaller and not worth significant supplier analysis.
Collaborative relationship: The supplier helps with the development of the product or the development of the supply chain by planning, ordering, delivering, storing, using, and replenishing the product. There can be many collaboration points in the purchase of a product.
Identify potential suppliers: Find potential suppliers who have the products you need in the locations you need them.
Search online for suppliers that have the products you are looking for.
Ask for referrals from others in the industry, including current suppliers, competitors, customers, and others.
Become involved in industry groups where you can make contacts and learn from them.
Select supplier: When selecting the supplier, choose a supplier that will meet all of your criteria. This is best accomplished through a weighted criteria table.
Identify the needs you want the supplier to meet and the characteristics you are looking for in a supplier. This constitutes the criteria in the table. See Comparing Alternatives in this library for more information.
Apply weight to each criterion you have listed in the table.
Rank all of the suppliers for each criterion and put the rankings (1, 2, 3, 4, etc.) in the table.
Multiply the rankings by the weight and add up the sums to find the supplier with the best score.
Develop the supplier: Work with the supplier to develop the contractual agreements and processes necessary to meet your needs for your on-going supply
Provide feedback: By giving feedback, you can create an opportunity for continuous improvement in the relationship with your supplier.
Template for capturing data:
Output Representation and Recommendations:
Use the Supplier/Criteria Assessment table to show recommendation
Examples:
See the output table in the Supplier Assessment Template