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How should I evaluate potential suppliers?
 

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Offices & Operations mentor Charles J. Bodenstab responds:
I suggest your first step be the firm establishment of the key parameters in your case that are critical to the product or service being supplied. The three classic considerations are price, quality, and reliability. However, you need to think about the situation carefully to make sure there isn't something else that is important. For example, your critical parameter may have something to do with a strategic partnership, in which the supplier provides an advantage in the marketplace.

In any case, you should think about these considerations objectively. I urge you to write down your parameters without thinking of any one specific vendor, so you can keep your thinking broad.

Your next task, as I see it, is to get a series of competitive bids that cover each of the parameters you've decided upon. That way, you can compare vendor against vendor. In today's world of the business-to-business Internet, this task is becoming more efficient than could have been imagined just a decade ago. I also recommend some due diligence on your part to verify the reliability of each vendor on issues such as price and delivery. References are one way to verify reliability; your own experience is another, if you have a history with the vendor.

Finally, I have always tried to use the "major/minor" supplier approach in my own business. That is, I would have one major supplier, which received around 70% to 80% of my business, backed up by a minor supplier, which received the balance. The major supplier was always aware that I had another supplier waiting in the wings and was less likely to take my business for granted. The minor supplier also knew that there was a bigger block of potential business available if it were to come through with a better proposal or consistently good performance. This approach minimizes the inherent risk associated with relying on only one supplier.

Copyright © 2000 inc.com LLC

Last updated: Jun 19, 2000




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