Finding Suppliers who will meet your needs in producing and supplying a product or service to your customers, and determining which one will maximize value for you.
What it is: Sourcing and Supplier Selection is the process by which you find the available suppliers who will meet your needs and selecting which one will maximize the value for you.
What does it do: 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 is it 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 are either not meeting your needs, or are doing so at a cost premium you are unwilling to pay. There is also day to day supplies and services that are used within your company and purchased from Vendors and Suppliers.
Where: Most often suppliers are required to supply raw materials to manufacturing facilities, but office supplies, cars, and equipment are used outside of a manufacturing site also.
Why: Purchasing from unreliable or costly suppliers can make you non-competitive in the market. Having good relations 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 consistency of specification and reliable delivery. Be sure they meet all of your needs and not just a low price.
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 is helping in the development of the product, or in the development of the supply chain in planning, ordering, delivering, storing, using, and replenishing the product. There can be many collaboration points in the purchase of a product.
Identify Potential Suppliers: You need to 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: In selecting the supplier you want to select a supplier that will meet all of the criteria you have for the type of supplier you want. This is best accomplished through a weighted criteria table.
Identify the needs you want to be met by the supplier 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 weighting to each criterion that 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 weighting and add up the sums to find the supplier with the best score.
Develop the supplier: Work with the supplier in developing 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.
