Supplier selection and relationship management

Supplier Selection

One of the foremost steps in procurement planning involves supplier selection. This starts with identifying potential suppliers who can meet the quantity and quality requirements of your establishment.
Criteria for selection vary but could include factors such as cost, quality, reliability, sustainability, and reputation in the industry. Having a structured selection process ensures the chosen suppliers align with your establishment’s objectives.
An Request for Proposal (RFP) is commonly used to solicit proposals from potential suppliers. This document should include all specifications for the desired goods, not only price but also factors like delivery timelines, minimum order quantities, etc.
A process of Due Diligence must be performed once potential suppliers have been shortlisted. This can include checking financial stability, reviewing reputation and customer feedback, and potentially visiting the supplier’s premises.
Decisions should not be solely based on cost. While cost is an important parameter, quality, reliability, supplier service, and ethical practices are equally important.

Continuous engagement with selected suppliers is key to maintaining a strong supplier relationship. Regular communication helps in addressing any issues and understanding each other’s requirements in a better way.
As part of relationship management, establishments need to monitor and evaluate supplier performance regularly using agreed Key Performance Indicators (KPIs). These KPIs could include timely delivery, accuracy of delivery, quality of goods, etc.
Feedback and recognition is an important part of relationship management. Giving regular feedback, both positive and constructive, helps suppliers improve their services. Recognition for good performance also motivates them to continue delivering high-quality goods.
Negotiations play a significant role in relationship management. Establishments need to build solid negotiation skills to handle price discussions, contract terms, service levels, etc.
In case of disputes or disagreements, establishments should have a Conflict Resolution Process in place. This can involve a formal meeting, negotiation or even third-party mediation if required.
Lastly, building partnerships rather than transactional relationships with suppliers can lead to long-term benefits including improved service levels, preferential pricing and access to new products.