How to Select Quality Vendor

How to Select Quality Vendor

contact:  kris@themanagementsystems.comchoose-person

The vendor selection process can be a very complicated and emotional undertaking if you don’t know how to approach it from the very start. Here are five steps to help you select the right vendor for your business. This guide will show you how to analyze your business requirements, search for prospective vendors, lead the team in selecting the winning vendor and provide you with insight on contract negotiations and avoiding negotiation mistakes.

1. Analyze the Business Requirements

Before you begin to gather data or perform interviews, assemble a team of people who have a vested interest in this particular vendor selection process. The first task that the vendor selection team needs accomplish is to define, in writing, the product, material or service that you are searching for a vendor. Next define the technical and business requirements. Also, define the vendor requirements. Finally, publish your document to the areas relevant to this vendor selection process and seek their input. Have the team analyze the comments and create a final document. In summary:

-Assemble an Evaluation Team

-Define the Product, Material or Service

-Define the Technical and Business Requirements

-Define the Vendor Requirements

-Publish a Requirements Document for Approval

2. Vendor Search

Now that you have agreement on the business and vendor requirements, the team now must start to search for possible vendors that will be able to deliver the material, product or service. The larger the scope of the vendor selection process the more vendors you should put on the table. Of course, not all vendors will meet your minimum requirements and the team will have to decide which vendors you will seek more information from. Next write a Request for Information (RFI) and send it to the selected vendors. Finally, evaluate their responses and select a small number of vendors that will make the “Short List” and move on to the next round. In summary:

-Compile a List of Possible Vendors

-Select Vendors to Request More Information From

-Write a Request for Information (RFI)

-Evaluate Responses and Create a “Short List” of Vendors

3. Request for Proposal (RFP) and Request for Quotation (RFQ)

The business requirements are defined and you have a short list of vendors that you want to evaluate. It is now time to write a Request for Proposal or Request for Quotation. Which ever format you decide, your RFP or RFQ should contain the following sections:

-Submission Details

-Introduction and Executive Summary

-Business Overview & Background

-Detailed Specifications

-Assumptions & Constraints

-Terms and Conditions

-Selection Criteria

4. Proposal Evaluation and Vendor Selection

The main objective of this phase is to minimize human emotion and political positioning in order to arrive at a decision that is in the best interest of the company. Be thorough in your investigation, seek input from all stakeholders and use the following methodology to lead the team to a unified vendor selection decision:

Preliminary Review of All Vendor Proposals

Record Business Requirements and Vendor Requirements

Assign Importance Value for Each Requirement

Assign a Performance Value for Each Requirement

Calculate a Total Performance Score

Select a the Winning Vendor

5. Contract Negotiation Strategies

The final stage in the vendor selection process is developing a contract negotiation strategy. Remember, you want to “partner” with your vendor and not “take them to the cleaners.” Review your objectives for your contract negotiation and plan for the negotiations be covering the following items:

-List Rank Your Priorities Along With Alternatives

-Know the Difference Between What You Need and What You Want

-Know Your Bottom Line So You Know When to Walk Away

-Define Any Time Constraints and Benchmarks

-Assess Potential Liabilities and Risks

-Confidentiality, non-compete, dispute resolution, changes in requirements

-Do the Same for Your Vendor (i.e. Walk a Mile in Their Shoes)

6. Contract Negotiation Mistakes

The smallest mistake can kill an otherwise productive contract negotiation process. Avoid these ten contract negotiation mistakes and avoid jeopardizing an otherwise productive contract negotiation process.


Choosing Vendors

hand shakecontact:

Your vendors have as much interest in your company’s success as you do.

When you make a lot of sales, they make a lot of sales; when you get paid, they get paid. Having reliable and trustworthy vendors can help your business succeed, just as dealing with unreliable or shady firms can cause major setbacks.

Start by asking around; other business owners in your area can be a great source of information. Once you’ve got a list of names, call your local Better Business Bureau to find out whether any complaints have been filed against any of the vendors on your list. You can visit vendor Web sites and even tour their physical locations. You can ask for customer testimonials and for product samples as well. The key is to get as much information as possible before you make a large monetary commitment to a vendor you don’t know.

As you begin to choose vendors, particularly those who will stock your inventory, try to think of them as business partners. You want to choose the ones with whom your company can develop a long-term, mutually profitable relationship, and that relationship starts with your first request for a price quote. Don’t be afraid to ask vendors for quotes; they’re used to it and they probably expect it. After all, this is a major purchase, and it’s never wise to make a major purchase without shopping around — especially when you’re going to a vendor you’ve never dealt with before.

When you’re dealing with a new business and new vendors, make sure to get price quotes from at least two sources for any purchase over $150. If your order will be a lot more than that, consider getting at least three different quotes; more is even better.
If you’re having a hard time finding vendors, and an even harder time finding information about them, you can run your own test by placing a very small order, under $100 in total value. If that process goes well, take it up a notch and place a slightly larger order the next time. Once you feel comfortable with the vendor, you can place your full-blown orders without worry.

Getting Quotes

When you want to make a big purchase for your business, you need to know the total cost upfront. To get that information, you need to ask the people who sell whatever it is you want to buy. In order for that information to be fixed (as opposed to changeable), it’s best to get it in writing. When your company is buying a product, that information will come in the form of a quote; when it’s services you’re after, the quote is usually referred to as an estimate.

The best way to get a quote is to talk with a salesperson; quote requests that come by mail are often ignored. Phone contact is fine, especially after you’ve begun to build a relationship with that vendor or salesman. For your first time out, though, a face-to-face meeting could prove more fruitful, especially if you’re spending a significant sum. Even though salesmen themselves are seldom involved in setting company pricing policy, they often have some leeway when it comes to closing a deal. When you establish a personal connection with a salesman, he’ll work harder with you and for you; after all, making a sale to you is his bread and butter. Flexible areas often include lower unit pricing when you buy in bulk, and better credit terms.

Hitting it off with the salesman is a great start toward developing a good relationship with a vendor. However, don’t stop after getting a single quote just because you like the first salesman you meet with. Another vendor may offer better pricing, better terms, better merchandise, and maybe a salesman that you’ll like even better.

Avoid These Vendors

There are some vendors that you should avoid. If you run across a vendor with one (or more) of the following characteristics, run in another direction:

Accepts cash only

Asks for checks made out to cash

Won’t send a brochure or catalog

Won’t give you a price quote or estimate in writing

Dirty, disorganized stockroom

No warehouse or storage facility

If one (or more) of these factors is the norm in your industry, and the vendor in question has gotten high marks from a reliable source, it’s probably safe to keep him on your list. However, if it’s the vendor telling you this is normal practice, and you can’t verify that with anyone else, look for a different vendor.