The success of the business depends a great deal on the suppliers.
A good supplier can bring a bounty of profits and happy customers, while a tough and inflexible supplier will provide a mountain of stress, worry, even dollar lost.
What can a small business owner do to ensure that a supplier is the right one to provide the needed products?
Rather than picking a supplier haphazardly, you should do a thorough evaluation. It is critical to ensure that the supplier choices you make are capable of delivering what you need and when you need it, as well as meeting your requirements for quality and performance standards.
The Supplier Evaluation Program can help you in the following situations:
The cost you pay to your supplier can make a big difference in your profit margin. If you have a supplier that is selling you wholesale items at a price per unit that is too close to your retail selling price, you end up making very little profit.
These things you should do to evaluate the price level:
1. Understand market conditions (including the rise and fall of raw materials).
If you are looking for a new supplier, you need to understand the price differences between similar products in different regions. And find the industry cluster of the product.
2. You must first shop around, combine the quotations of other suppliers, and calculate a target price yourself.
Then eliminate suppliers who offer much more than your target price. Also please do not blindly pursue the lowest price, but choose the cheapest price based on your own requirements for product quality.
If the quotations of different suppliers for a product are very different, you need to pay attention instead of directly choosing the one with the lower price.
You must know that there is no lowest price in China, only lower prices. No matter how poor quality the product is, China suppliers can provide it.
3. Check your profit.
If the product price made a low profit, then you should find other suppliers or reduce the cost by other ways.
While cost is a major and important factor in choosing a supplier, it should not be the only deciding factor.
Consider the following as part of your analysis as well.
While it can be difficult to quantify the quality of a product, this should always be a central component of a supplier evaluation.
Before the first cooperation, it’s difficult to check the product quality level.
Most suppliers will send you photos of the products or product catalogs for free, but it’s difficult to gauge the quality of items from a photo. It’s best to ask for a sample of the goods you are interested in before the cooperation.
Ideally, you’ll receive a test sample of the product to validate its quality. You may have to pay for samples, but it is usually a small investment for peace of mind.
However, some dishonest suppliers may differ in the quality of samples and finished products.
They use high-quality samples to attract you to place an order, and then deliver inferior products after you place the order. At that time the you had already paid so you had to accept it.
So you should also pay attention to remind the supplier to ensure that the quality of the sample and the bulk product is the same, and hint to the supplier that if the cooperation goes well, you will have a larger order.
After a period of cooperation, you can evaluate the quality of the product from many aspects. The quality can be described in terms of quality pass rate, average pass rate, batch rejection rate, etc.
1. Quality qualification rate
If a total of N pieces of goods are sampled in one delivery and M pieces are qualified, the quality qualification rate = M / N * 100%. Obviously, the higher the quality qualification rate, the better the product quality.
2. Average pass rate
According to the pass rate of each delivery, calculate the average of the pass rate within a certain fixed time to judge the quality.
For example, if a supplier delivers 3 times in January, the pass rate is 90%, 85%, 95%, the average pass rate = (90% + 85% + 95%) / 3 = 90%, the higher the pass rate, the better the quality.
3. Batch rejection rate
The batch return rate is the ratio of the returned batch to the purchase batch. If a supplier delivers 10 batches a year and returns 2 batches, its batch return rate = 2/10*100% = 20%. The higher the batch return rate, the worse the quality.
Will your supplier meet your needs on time? This is a question that should be asked.
Suppliers sometimes experience inventory shortages and even the truck punctured during the delivery. Anyway, if your order is frequently delayed, please consider using another supplier.
The inspection of the delivery date is mainly to inspect the supplier’s on-time delivery rate, delivery cycle, and transportation conditions.
1. The on-time delivery rate can be measured by the ratio of the number of on-time deliveries to the total number of deliveries.
On-time delivery rate = on-time delivery times / total delivery times * 100%
2. Delivery cycle refers to the length of time from the date the order is issued to the time of receipt, usually in days.
3. Transportation conditions means that whether the product is damaged in transportation.
After each order is completed, it’s better to have your own manage form to record the problems in the order and the performance of the supplier to evaluate whether the supplier can continue to cooperate
Just as everyone has what they are good at, every supplier also has their best products.
Factories usually specialize in producing one type of product, but they may have one or two products that are very popular. Factories often produce these products in batches, and the cost of the products will naturally drop.
So for these products, the supplier’s quotation and MOQ will be more friendly to customers. As for other products of the supplier, the supplier’s production cost may be relatively high, and the production process is not so smooth.
Therefore, it is also very important to understand the main products of a supplier.
SourcingArts recommends that buyers purchase the superior products of each supplier. However, some buyers think that it is easier to work with one supplier and it is worth paying a little more for the purchase cost. You can choose flexibly according to your needs.
Like other assessment indicators, assessing suppliers’ performance in terms of support, cooperation, and service is usually a qualitative assessment.
Related indicators include feedback information time, cooperation attitude, participation in the company’s improvement and development projects, and after-sales service.
1. Whether the feedback information responds to orders, delivery, quality complaints, etc. in a timely and rapid manner, whether the reply is complete, and whether the return, selection, etc. are handled in a timely manner.
2. Cooperative attitude. Whether the supplier regard you as an important customer, whether they pay attention to the your requirements and whether the supplier’s internal communication and collaboration (such as marketing, production, planning, engineering, quality, etc.) can be integrated understand and meet the yours requirements?
3. Joint improvement. Does the supplier actively discuss with you plans to improve quality, supply, cost, etc.? Does the supplier provide you with some suggestions or better solutions?
4. After-sales service. Do they actively seek your opinions and actively solve or prevent problems for customers?
The key to providing quality services is to exceed user expectations. The quality of service depends on the degree of difference between the service level perceived by the user and the expected service level. The perceived attributes of service quality are divided into five levels:
Tangible: Appearance perception, such as physical equipment, personnel, communication equipment, etc.
Reliability: The ability to accurately complete the promised service.
Responsiveness: willing to help customers and provide fast service.
Guarantee: The customer does not know the result before the service is completed. Therefore, it is necessary for suppliers to ensure that they provide customers with high-quality products and services, and to be responsible to customers.
Empathy: Companies should care about customers, provide personalized services, and consider customers from their perspective.
Technical considerations are much more complicated. First consider whether you are a technology-based company. If you are not, the supplier’s technical evaluation is not so important. Not all companies require a high level of technical capabilities.
Further consider who provides the technology, the supplier or your company?
The slogan of a company is, “We do the best”, then the supplier only needs to make it according to their specifications. The buyer has the technology, and the supplier should be a loyal executor.
Another company’s slogan is: “We look for suppliers because they do better than us.” Many companies rely on the technology provided by the suppliers or strive to find new technologies in the market.
Therefore, the supplier’s technology determines the competitiveness of their company in the market.
The next question to consider is whether the technology you need is advanced. Advanced technology is conducive to the company’s products to occupy more market shares and achieve customer satisfaction.
However, the uncertainty of advanced technology will also bring high risks.
Buyers should start from their own needs and evaluate the supplier’s current technical capabilities, R&D capabilities, and technical stability.
Buyers need to always pay attention to the financial health of the supplier, and can’t wait until the supplier has operational difficulties.
Just like before the earthquake, there will be some abnormal signs, and some signals will be sent out before the supplier’s financial situation goes wrong.
For example, executives leave frequently, especially those responsible for the core business. The supplier’s excessively high debt ratio may lead to capital pressure, and a little carelessness will cause the capital chain to break.
The supplier needs to have enough capacity to handle your requirements. So, ask how quickly they will be able to respond to your needs, and to market and supply fluctuations.
Check the supplier’s resources. Do they have the means to meet your orders? These resources could include staff, equipment, warehouse, and available materials.
Safety, cleanliness, and order
In a neat and orderly factory, parts are easy to find, inventory is easy to count and estimate, and product transfer is safe and efficient. Such a factory has sufficient light, good air quality, and low noise. Inventory, tools, and processes are clearly marked with an intuitive marking system. How well a factory is doing in these areas can be seen at a glance by just browsing.
All components should receive equal attention. Many companies arrange their valuable parts in an orderly manner, but often take lightly low-value parts such as labels and fasteners. This habit is sometimes very costly.
In this case, the management cost of the factory will be much lower, so the product price will naturally be reduced. Of course, you can only evaluate when you visit the supplier in person.
Master the basic information of the supplier is essential.
If you have a huge number of suppliers and you intend to craft a survey to evaluate them, it will be cumbersome to apply the same survey to each and every one. It is better to separate suppliers into levels based on how critical they are.
Decide the classification that is best for you and evaluate suppliers according to the effect they have on your product or service in order of importance.
The future plans of suppliers and yours are compatible. Has strong product development capabilities and this procurement business is very important to you, The supplier also pay attention to your business.
Partner supplier should always meet complete partner standards in 4 key areas: quality, price, delivery and service.
The company’s sourcing business is very important to the supplier, but this business is not very important to you. Such a supplier is undoubtedly beneficial to the company and is the company’s “priority supplier”.
Suppliers are always committed to continuously improving quality and delivery levels. The supplier’s service or product meets the buyer’s strategic needs.
Suppliers think that your order is not important to them, but the business is very important to you. Such suppliers are ”key suppliers” who need to pay attention to improvement.
The purchasing business is not very important to the supplier and you, and the corresponding suppliers can be easily selected and replaced.
The so-called, shop around. But no matter how the buyer compares, it is “smart to sell than to buy”. For this embarrassment, there must be an alternative supplier. 2-3 alternative suppliers are the best.
The backup is that you still have a cooperating supplier, but you have to ensure that there is at least a supplier that can be used as before one.
If there is a problem with the cooperating supplier, directly cooperate with the alternate supplier directly, and there will be no or little impact on production.
Dealing with suppliers is the most time-consuming and energy-consuming thing, because, in production, suppliers always have many unexpected problems, which will scare you from time to time. If there is only one supplier for a product at this time, you are very passive.’
Supplier evaluation is something you need to continue to do before placing an order and after cooperation. By regularly evaluating suppliers, you can gain greater insight into operations, proactively discover growth opportunities, reduce risks, simplify production schedules, eliminate unnecessary expenses and reduce unnecessary troubles.
These will make your product more advantageous, and your business will be more successful！