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Top 7 Things you MUST do When Selecting a Vendor

There are several reasons a business might be selecting a vendor, and the 2 most common are:

  • To replace an existing, failing or outdated 
  • To fill a need for new materials or services
Both of these reasons, and any others, should follow the same process for selecting a vendor.  There are 7 things you must do to select the right vendor:
  1. We need to define the problem to solve
  2. Create scenarios that must be tested 
  3. Test the scenarios against new vendor
  4. Define a time line for selecting the new vendor
  5. Define a budget for the materials/services provided by the vendor
  6. Get feedback from your employees on the vendor shortlist
  7. Check the vendor's social media and market ratings
Since scenarios are one of the major components to selecting a new vendor, we will discuss them a bit more.  The scenarios should include all of the important issues that you are currently experiencing.  An example of problems to solve might look something like this:
  • Need Service on demand (24/7 service)
  • Need to have monthly billing
  • Need Deliveries on weekends
  • Must allow drop shipments
  • Must have dedicated support representative
When we have our requirements, similar to the list above, we work on some scenarios.  One of those might look like this:
  • At 6PM on a Friday our biggest customer calls in an urgent order for ItemX and we ran out of  MaterialX required.  Can VendorX provide the material same day?
Your scenarios might be more or less complex than the one above, but the bottom line is - can the new vendor solve the problem presented by the scenario.  And the scenarios need to be things that you are working to resolve daily.  Let's face it, even with the best tools and people in place we will still run into problems that weren't accounted for.  That is what the scenarios are for, to help us see possible problems and find the right solutions ahead of time.  No one wants to be caught holding the bag when things go wrong, so give yourself and your business a way out by selecting the right vendor for the problem.

Why you should get feedback from employees

In many cases your employees know things about potential vendors that you have no knowledge of, or didn't think about when defining the scenarios.  The earlier in the process that you are able to ask for feedback, the better.  This will give a fresh outlook on the problems to solve, and will improve your selection process.  Employees may have worked for other businesses using the same vendors that are on your short list, and may have some valid input on the performance of the vendor.  Keep in mind, however, that this can also be a hindrance.  Some employees might have an axe to grind with a specific vendor, so you will want to be selective in who you choose to ask.

Avoiding Problems

Some of the problems you will have in selecting a vendor can be mitigated by using an ERP system.  This is not a magic pill that will make everything perfect, it is only one way to manage the vendor you have selected.

Think about a common scenario that happens all too often when selecting a vendor who supplies some materials required in manufacturing.  You select a vendor who promises to deliver your goods with the required timing, say maximum lead time of 7 days for any order placed within a specific timeframe.  There will inevitably be a problem with one of your shipments, it might take 10 days due to an unexpected shortage, or snow storm.  What can you do in those cases?  How do you plan for those unplanned incidents?

If you are using an ERP, this just got a little easier to plan for.  You can have the ERP set to auto order  all of your materials at a set Minimum Order point.  This Minimum Order point should be the bridge between shipments, and be able to account for some cases where the shipment might not be as timely as we need.  It doesn't solve all the problems, but it does help!

Conclusion

Selecting the right vendor is very important to your company's survival, reputation, and problem solving skills.  The wrong vendor can bring down a carefully built business with poor service.  Using an ERP can help keep some of the problems caused by a vendor at bay, but it won't keep you in business when the vendor continues to fail.  Make your life easier, and choose the right vendor for the problem.

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