Dealing with suppliers involves numerous steps: surveys, checks, budgets and a lot of alignment meetings. The process of choosing the right supplier for your demand involves meetings, reviews, discussions and definitions, all to make sure that both sides gain in that relationship.
The first step is the actual choice of supplier. After identifying what your company needs when receiving the purchase order, it’s time to assess the possibilities. Usually, you will work with more than one viable option of supplier, and choosing the best one can be quite challenging.
The biggest mistake one can make is to choose a supplier without analyzing thoroughly all the qualities and faults of each option. Luckily, there are some key points that can help you make your decision more easily.
We set aside 5 of them, the most important factors to check before closing a deal with a supplier! Ready? Read below:
Price and conditions
Perhaps the price and terms of payment are the factors that weigh the most when choosing a supplier. Here, you must go back to your financial planning, and check if what was offered fits your budget and your needs.
Suppliers must offer a fair price for the service, but it is your role to negotiate so that the final price of your product is not compromised. Remember: a low price does not always mean low quality as well as a high price does not necessarily indicate a high level of quality. Find out what makes up this price by analyzing the quotations, and see if it makes sense.
Be beware of prices far above or far below what the market generally provides. High prices may be just a way of trading, as a margin to reduce the price to a level acceptable to the supplier. Low prices can hide abusive fees and contractual obligations.
And remember to see the expiration date of the quotation, because the price you see today may not be the same 3 weeks from now, and if you need to make the purchase next month, this quotation will be useless – and all your effort will be wasted.
To maintain a good relationship with suppliers, the company must set deadlines that can be met fully. Don’t forget to align your schedule with theirs, and always question whether the supplier offers a very long or very short delivery time.
You have every right to request proof of compliance with deadlines, as well as reports and statements from other customers, to have more faith in the work of the supplier.
Try to find out if the supplier has a history of unforeseen events that expand the deadlines, like accidents or shipping problems. Speaking of which, don’t forget to check the delivery options each supplier offers. Besides making a huge difference in the final price, different kinds of transport demand different deadlines, and you must be prepared for that.
Partner up only with companies that work with visions and values similar to yours and that can, in some way, enrich your production. To ensure that you are not being carried away by empty words and clichés, go beyond the institutional website and look for other customers from the supplier before closing the deal.
Find out what the partnership experience was like. Be sure to confirm whether the dialogue was easy, and if the company channels were available to resolve questions and problems.
The focus here is in the supplier’s ability to provide the service you require!
Quality is non-negotiable, and this also applies to the services provided by a supplier.
By service, we mean on-time deliveries, technical support when necessary and the support of the structure as a whole. Just imagine, if a supplier delays a delivery, then your product won’t be ready in time, your sales will be hampered, and your business may suffer reprisals from the customers.
So make sure your supplier is reliable. Check the legal and economic status of the company before closing a partnership. Request documents that demonstrate whether the supplier is indebted, facing labor proceedings or other criminal charges, and whether taxes are being paid on time. Any problem in these areas can impact your company’s image!
Speaking of image, the way the public sees your suppliers is decisive information! Like we said in the values topic, it’s important to partner up with good companies, that can enrich not only your business, but also your image.
It’s true that not every partnership will be a total win, but one cannot and must not be a total lost. To prevent that, dig in deep and find out where your possible suppliers stand on the public opinion!
You can do some research on their social media profiles, analyzing how they deal with criticism and complaints there, and also if there are any efforts towards keeping a good public image. Also, there are some websites devoted to publicizing criticism from unsatisfied customers and this is a great opportunity to check the supplier’s conduct on each situation.
Of course, there are other points you can check to make a deeper analysis on each supplier. We hope this article gives you some direction, but don’t stop here!
A nice tip is to try to choose a supplier for your company just like you do for your own personal purchases. How do you choose a store to buy from? Do you go online and look for reviews from previous customers? Do you only buy from stores that have been in business for a while?
Better yet, how do you choose someone to do a repair in your home? Everything you check before hiring this person should be checked before signing with a supplier. The care you have with your house should be extended to your company!
So, do you analyze any other criteria when choosing suppliers? Does your company have a special way to decide who to hire? Share with us! Leave your insights at the comments below!
Quotes are part of the purchasing process of all companies. As you probably know, first you receive a demand from one of the company’s departments. Then, you must contact the suppliers.
The quotations are used so that the contractor can understand under which conditions the supplier will work, such as the price charged for the product or service, deadlines, technical specifications of delivery, payment methods and more – learn here about supplier compliance.
It is through quotations that the purchasing department chooses the supplier. Although it seems like a very simple process, the quotes have some peculiarities that can make all the difference in the final price of the product or service.
It is very important to learn how to compare quotations, know which information is relevant and how you can put suppliers in competition. The stage of quotations is one of the first steps in the purchasing process, and one of the most important to the success of the purchase in the Industry 4.0!
Check it out:
Another supplier, another quotation
Each supplier presents its quotations in their own format. This means that your company’s purchasing department will receive hundreds of different quotations for the same product or service, which will not always contain the same information or be under the same conditions.
Some suppliers, for example, include the freight cost in the quotation; others will allow the customer to search the products directly from the factory or the distributor. Some offer low prices, but they determine minimum amounts to guarantee this value; others will always work at the same price, but offer other advantageous conditions.
Because of these distinctions, it is crucial to know what to check to compare quotes. We have outlined some points that you cannot fail to check in a quote, and which criteria you should use to choose between suppliers. First read here how to get unified quotations of different parts optimizing your process.
Always check the technical specifications of the quote. This includes all information about the product, such as weight, color, size, and other data. It is important that the quotation specifies the conditions under which the product will arrive on delivery, if assembled or dismantled, and whether the supplier provides equipment for assembly, for example.
Unit and packing
Speaking of conditions, it’s fundamental to check the unit and packing specifications. Some products are purchased in large quantities, such as small spare parts, tools, screws, nails. Others are bought only in case of need or in small quantities, like engines. The quotation must specify in which unit the product will be purchased (for example, by pounds or kilos, hundreds or thousands), as well as the packaging in which it will be delivered.
Packaging is really important because it has a direct influence on price! Some inputs are transported in pallet boxes, others in plastic bags with bubble wrap or pieces of foam for protection, and this makes all the difference in the final price.
The transport and Incoterm should also be evaluated. Air freight is faster, but more expensive, while transportation by highways or railways may be cheaper (despite the greater risks of accidents and longer lead time). Transport by ships involves port tariffs, in addition to the time of loading and unloading, demanding a thorough analysis of the price and estimated deadline.
This leads us to the next point.
The delivery time is perhaps the most fundamental information of the quote – after the final price, of course. The delivery time must be in line with what the company specifies in the purchase order, and the supplier must undertake to meet this deadline, except in extreme circumstances such as accidents or strikes, for example.
Each supplier receives payment in the way that best suits them. Some offer the option of installments with a deposit, while others do not request one payment, others offer discounts for cash payment, and so on. The payment conditions must be very well discriminated in the quotation, since it is a prime factor for the choice of supplier!
Validity of the proposal
All quotes have an expiration date. Watch out for this! Make sure that the quote that was sent to you is valid for enough time to make the purchase under those conditions, since the pricing and supplier selection process can be a little time-consuming.
Place and conditions of delivery
The quotes from the suppliers usually indicate the place of delivery or pick up of the product. It can be in the company itself, in the factory, in the distributor’s warehouse, in the port, in the airport, in the carrier, at the border. Identify the location and what is embedded in the price by the acronym CIF (cost, insurance and freight) for insurance and freight costs included, and FOB (free on board) for merchandise that will be withdrawn by the buyer. Make sure these delivery terms meet the needs of your business before evaluating the final price!
If two quotes for the same product or service present different information, the best thing to do is to break the quotation down, point by point. Take each category that we mentioned above and put together a table. Then, divide each quote into those points, fill in the individual price of each item, and enter the specifics as they appear.
For example: if a supplier offers free shipping and a fee to assemble the equipment, and another supplier considers freight and assembly a single fee, you must enter this information separately in the table, but add the values from the first supplier, to make a correct comparison with the second.
By doing so, you will be able to compare quotes that seem to be completely different!
So, do you feel ready to compare quotations without missing the relevant points? Don’t forget to unravel every quotation, especially if there is different information to compare. It takes more time than only looking and comparing final prices, but your analysis becomes much more assertive, and so does your supplier choice. To learn more tips on how to choose your suppliers read the articles below:
Soluparts, a global trading company
You can also leave the task of comparing quotations and choosing the best suppliers with a company that is specialized in all types of industrial materials such as Soluparts.
Soluparts is able to offer quotations from the most relevant manufacturers in the world – read an article that shows our differentials and learn how we can optimize the routine of your purchasing department.
Take the opportunity and quote with our team!
Supplier mapping is a key task for medium and large companies – and it’s also one of the biggest challenges in the supply chain. When choosing a supplier, a company must take a lot of things into consideration, such as price, deadlines, size of each demand and the commitment of the supplier to the company’s needs.
The entire production depends directly on the choices made in the assembly of the supply chain, which means that the productivity of the company is linked intrinsically to the quality level of the suppliers. Choosing a wrong supplier can, basically, ruin everything.
With that said, it’s not unusual to question how things are done in your company when it comes to mapping suppliers. If you’re not satisfied with the methods used, or if you feel like a change is much needed, this article is for you!
There are some fundamental points that can help prevent failures and problems, but only when there’s perfect alignment between the company and its suppliers. Needless to say, any small disagreement can compromise the whole process and result in unimaginable damage.
Check out below our 4 tips for mapping suppliers assertively and securely, and make sure to follow each one of them!
Know your demand very well
The first step in supplier mapping is to thoroughly understand every demand that arrives in the hands of the purchasing department.
Here, you want to determine quantities, delivery terms, deadlines that need to be met, and, in sum, all issues involved in the order. With that information in hand, you can align your demand with the service each supplier offers and then choose the one that best fits your needs and conditions.
In addition, by knowing the demands well you can identify possible barriers to product or service delivery – such as quantity, format or assembly errors – and plan yourself ahead to solve those issues.
Besides, if you have a very large demand, you can hire more than one supplier for the job, to avoid overwhelming one vendor with more work than it can handle, and ensure on-time delivery!
Finally, define which demands are priorities, and which you can deal with later, to better organize supplier analysis and deadlines.
Develop a supply schedule
It is essential to have all the purchasing movement very well organized: what is the status of each demand, which supplier is responsible for each one, what are the terms and conditions of delivery, etc.
To do this, develop a method to follow each step of the process, a supply schedule. In it, enter all the essential information to follow the progress of each demand.
You want to keep tabs on order dates, delivery forecasts, deadlines, the responsible suppliers, essential delivery conditions, any additional services that will be provided on delivery and other observations you deem necessary!
Make sure to adjust your schedule when necessary. Take changes and/or additions to the order into account, and any other situations that can delay delivery.
Be familiar with the values of each supplier
It is obvious that prices and deadlines are fundamental, but some other points must influence your choice of supplier just as much, or even more. When mapping suppliers, make sure to know every aspect of the company, not just what they choose to show you.
Have as much information as possible about the service that each supplier offers. Some can literally save your business! For example:
It is essential to hire suppliers whose values are consonant with the ones of your company. Here, you want to do extensive research considering: does the supplier have a high level of quality that is recognized in the market? Are they in labor proceedings or having contract problems? What are the company’s social policies? How do they deal with environmental issues?
All of these answers should be in accordance with your company’s policies, with the image you want to imprint on your customers. A supplier who disagrees with your values can cause conflicts not only with you while doing business, but also with your customers, who may question your company’s positions. Do not risk it!
Once you find a supplier that is a good addition to your mission, stay true to standard corporate processes and guidelines! Always be consistent, and your suppliers will tend to keep that behavior as well.
Automate the relationship
The most common way of organizing information is to use spreadsheets and tables, but it is common knowledge that any type of manual control is subject to failure. Above all, spreadsheets rely on employees to update them and each of the employee’s routine can lead them to forget to fill in properly, or worse: enter incorrect information.
To avoid this type of situation, it is advisable to make use of softwares specially developed for this phase of the supply chain. There are options that allow you to constantly monitor each supplier’s performance, calculate risks and possible delays, generate reports, compare conditions and much more!
By making the relationship with the suppliers easier, you enable better exchange of information between the parties, so that improvements can be put into practice without much complication.
Don’t try to find the “perfect supplier”
Now, here is the thing: there is no such thing as a perfect supplier, or a perfect contract, let alone a perfect business. But that only means you should always strive to find the best match for your needs.
Sometimes, the best option is the one that has the lowest price, or is the biggest and best known company. But sometimes the best supplier is the one that may not offer the better price, but has the best values and/or the best and easiest crew to deal with.
The secret here is to always try to find a balance between all of the qualities you look for in a supplier partnership and all of the “not so good things” you are willing to accept to close the deal!
Regardless, following the tips we listed in this article will definitely make the entire process of supplier mapping easier and much more assertive at your company.
Do you have different tips to offer in this subject? Leave it below in the comment box!
How does the purchasing process work in your business?
In general, purchases occur very similarly in most small, medium or large businesses. This is because the procedure is quite similar, and what changes is mainly the size and volume of orders, depending on the performance of each company. Check below the steps of the purchasing cycle that are often repeated out there, and how each should work – in theory.
The purchasing process in theory
1. Purchase requisition analysis
This is the first moment of the cycle. Here, the purchasing department receives a requisition, a document that expresses the need that another department or employee has for a product. Upon receiving it, the purchasing manager must review the actual need for that purchase, as well as the specifications, quantities and delivery date required. With this information in hand, the purchasing department moves on to the next step.
2. Selection of suppliers
At this stage, an extensive search is conducted to raise possible suppliers for the required purchase. Here, the purchasing department must check all the suppliers already approved, that is, that already have active service contracts. In case of a first purchase, it is necessary to search for new suppliers and to check prices and conditions of payment, delivery and support. It is the role of the purchasing department to find the supplier that offers the best conditions, and that does not necessarily mean the lowest price. After the choice of supplier, the purchase order is issued.
3. Issue of the purchase order
The purchase order is issued, sent to the supplier and to the accounting department, in addition to the ordering department and also the one that will receive the shipment. From now on, it is necessary that the purchasing department accompany the process, ensuring that delivery is made within the given time. If any problems occur, by following the process closely the purchasing department can get around the situation more easily and quickly.
4. Delivery of the order
When receiving the goods, it is necessary to inspect and verify that the requested specifications are in order, as well as the right quantity and the conditions of delivery – if there are no defects or damages caused by transport. If everything is in order, the good is forwarded to the requesting department or to the company stock, and the purchase order and a receipt report should be forwarded for billing to the accounting department.
Purchasing process in practice
By following these steps, everything should work in order, right?
Wrong. Remember that at the beginning we said that these steps are the way things should work? Yeah. Each of these steps has its risks, and however closely the procedures are followed, the entire operation can be compromised by a slight oversight or slip. And, in the business’ daily flow, problems in the process are more common than we would like, especially in large companies dealing with many requisitions and deliveries simultaneously.
There are simpler and safer ways to perform each of these steps, to ensure that they occur correctly, and to make your purchasing process really effective. Check them out:
1. Purchase requisition analysis
By establishing protocols and properly training employees, the chances of errors in completing and submitting a purchase requisition are noticeably reduced. Requisition data are critical to the supplier search procedure and purchase decision, and mis-filed or erroneous information can undermine the entire process. It is interesting to invest in ways to automate this step of the purchasing cycle, reducing paperwork and making the activity of submitting a request more optimized and simplified.
2. Selection of suppliers and Issue of purchase order
Here’s a golden hint! A purchasing department in a large company handles hundreds of purchase requisitions per week, which ask for the most different types of goods, which will come from several different suppliers. The person responsible for the requisitions should analyze each of them individually, categorize them, search for specific suppliers for each of the reported needs, search for the best prices in the national and even international market… It is already tiring to read, isn’t it? That’s where the danger is!
To facilitate this part of the process, there are companies that specialize in the purchase of materials for maintenance and replacement parts, that go after the best suppliers around the world and find the best prices and conditions to meet your needs. So you can focus multiple orders in one place, reducing the number of different purchase orders, making the process more organized.
Closing partnerships with this type of company is very valuable to your business, since it reduces the workload of the purchasing department, streamlines the routines and allows the process to be conducted in a more coordinated manner. It’s a typical example of a win-win situation!
And by optimizing routines, purchasing managers are given more time to deal with other procedures, such as better organization of the purchasing documentation, which has a direct impact on the control of each supplier’s deliveries and deadlines.
3. Delivery of the product
With less paperwork to handle, it’s easier for the purchasing manager to track supplier deadlines and deliveries, paying more attention to this step of the process. As a result, the risk of problems going unnoticed decreases, closing the purchasing cycle with a golden key!
It’s also important to say that most of those companies we cited in the last topic manage to also take care of the transportation, making everything easier for you and your business!
How to purchase effectively
In this article we showed you how the purchase cycle should work in every company, the problems usually found in each step and how one can ensure that the process runs without many disturbance. Here, you’ve learnt that the primary concern must be to easy the parts than can be eased, by optimizing routines and getting rid of unnecessary paperwork.
Companies that participate in the purchasing process with you, searching for new suppliers worldwide and ensuring the best conditions for your business’ needs are the best way to turn the purchasing cycle into a well handled and guided process. By doing that, you leave the purchasing department free, to worry about other steps that are as essential to your company’s success as the purchases are.
How do you manage the purchases at your company? Do you think your process runs effectively? Tell us in the comments below!
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