Tag: vendor selection criteria

vendor selection

A Comprehensive Framework for Vendor Selection

The vendor selection process has undergone significant changes in recent years. The increased reliance on outsourcing complex services and products has made the vendor selection process an extremely important of businesses. Companies require a framework for vendor selection that can rank existing vendors depending upon the requirement, select right vendors for the business and maintain cordial relationships with them.  Here’s a 7 step process to help you understand the key steps involved in the vendor selection.

Steps Involved in the Vendor Selection

#1 Identifying Potential Vendors

To survive in this intensely competitive market, it is imperative to identify new vendors apart from relying on existing vendors. Here are the few points that companies need to consider for vendor selection.

Importance of New Vendors: New vendors may be superior from existing vendors\ in terms of efficiency and capabilities. They may have new technologies and strategies that can reduce the production costs of companies. Also, new vendors may increase competition and minimize risks pertaining to the supply chain.

Check Vendors’ Capability: It helps companies to reduce the likelihood of vendor non- performance such as late delivery, non-delivery, or delivery of non-conforming (faulty) goods before awarding contracts to vendors.

Improving the vendor selection process requires companies to analyze new and existing vendors. Request a free demo to know how our experts can help you with real-time insights pertaining to vendors in different industries.

#2 Information Request to Vendors

Once new vendors have been identified, the next step in the vendor selection process is to formally request information from vendors about their goods and services. While there is no agreed upon terminology, the information asked can be broadly classified into three different types.

Request for Information (RFI): RFI is issued when companies are interested in knowing about the options available with vendors to meet their present needs. They want to know how a particular vendors’ goods and services have edge over others. However, issuing RFI by companies does not guarantee a contract.

Request for Proposal (RFP): It is issued when companies have a sense of the marketplace. It includes a statement of work which contains a certain set of performance parameters which vendors need to fulfil. Vendors provide detailed information to companies on how they would address such demands and the price they are expecting in return.

Request for Quote (RFQ): RFQ is issued when companies develop a statement of work stating the actual requirement of goods or services needed. RFQs along with the structured tendering process is the most prevalent in today’s competitive marketplace.

#3 Evaluation

In the vendor evaluation process, a data bank containing an authorized list of vendors with their profiles is developed. Data comprises critical information such as quality assessment, technical competence and organizational profile corresponding to each vendor.  It depicts the performance of vendors on a quantitative scale based on different factors that can be categorized under given aspects in the vendor selection process.

Cost Criteria: It determines vital elements of the cost associated with purchases. It considers purchase cost, transportation cost, and tax prices to figure out the minimum price of the product to increase profitability.

Technical Capability: It assesses the competent technical abilities of vendors required for delivering good quality product or services and promote successful development efforts.

Quality Assessment: It is an important factor for both parties to ensure the quality and availability of products. It is one of the key vendor selection criteria and methods that help vendors  to improve and maintain quality and delivery performance.

Organizational Profile: Owing to the number of unprecedented risks affecting the performance of vendors, it is crucial for companies to gain details regarding marketing goals and their financial performance. A robust vendor selection process ensures high organizational power and advanced coordination skills from vendors.

Wondering how vendor selection impacts cost and quality of operations?

Request a free proposal and access our complete portfolio of vendor management solutions.

#4 Contract Terms

The vendor selection process culminates in a contract between companies and vendors. A contract specifies the formal contractual terms that vendors need to abide by apart from mentioning payment terms. It specifies rules of payment and non-payment arrangements, liquidates damages paid upon the breaching the contract. The contract also specifies details related to how the contract will be executed, such as delivery quantities, schedule of delivery, delivery locations, quality level, technical specifications, and tenure of the contract.

#5 Negotiation

It is one of the most vital steps in the vendor selection process. After the vendors’ qualifications and contract terms are evaluated, the negotiation process starts. In this process, companies try to induce favorable terms from vendors, and likewise, vendors attempt to induce favorable terms from the company (purchaser). However, few companies dictate the terms to vendors.

Instead of squeezing every penny out of vendors, companies should focus on producing the most comprehensive contract document and improving the process of vendor selection.

Want to know how the vendor selection process can influence the negotiation process,  request for more information here.

#6 Contract Awarding

Once companies have finished evaluating vendors, the process of contract awarding begins. During this phase, companies decide which vendor or vendors they finally want to work with. Companies may choose to award the contract to single or multiple vendors depending upon the goods and services needed.  They can award contracts to several vendors in order to have a wider range of options and encourage vendors about their possible participation in future contract competitions.

#7 Vendor Monitoring 

Monitoring vendors’ performance during the life of the contract is important to maintain the standards of goods and services. It identifies cost containment  and checks if there are issues in the quality of items delivered and charges back to vendors. Also, it helps companies to make improvement in the vendor selection process in the future.

Why SpendEdge:

At SpendEdge, we understand that companies can leverage significant benefits from the vendor selection process while contracting with vendors. However, it requires a tremendous amount of resources and time. Through this blog, we have tried to establish a framework for vendor selection to help companies succeed in this competitive environment by ensuring supply of quality products and services within schedule.

Determining vendor selection criteria and methods is a time consuming task.  Get in touch with our experts and know how they can assist you in vendor selection.


4 Effective Steps to Successful Supplier Selection

Selecting suppliers is one of the most critical aspects of any organization. Any inaccuracy in the supplier selection process can lead to poor supplier performance, supply disruptions, and inefficiencies in the business process. However, not many organizations adopt a well-defined vendor selection process and, therefore, struggle when it comes to reducing excess spend.

The inability to leverage effective solutions for supplier selection results in common supplier failures that can be defined in two categories, i.e., quality failures and failures of timing. Quality failures may influence costs to the buying firms; whereas, failures of timings come in the form of late deliveries, back orders, variable lead times, and incorrect shipments. It may include production shutdowns, late deliveries to customers, and increased inventories. In any scenario, supplier failures add to the additionl costs for the buying organization and impact their performance.

Why is selecting a supplier so important?

Any buying organizations’ performance is directly influenced by their supplier’s performance. When suppliers fail to deliver, the supply chain performance of the business starts dwindling and they start looking out for ways to identify an alternative supplier. Conversely, changing suppliers too often can also negatively impact the price and quality of products and lead to stability issues.

At SpendEdge, we understand the impact that an efficient supplier selection process can have on the financial performance of the business. And to help businesses overcome such issues, we have listed some basic steps that can help improve your supplier selection process substantially.

Want to decrease additional costs arising from supplier failures? Talk to our experts and know how adopting an effective supplier selection procedure can reduce the probability of such situations.

Four critical steps to improve supplier selection

Step 1: Identify suppliers

Though identifying suitable suppliers is the key objective of any supplier selection process, business still need to be clear about their expectations from a supplier. By taking into account factors such as suppliers delivery commitments, customer service, reliability and responsiveness, and business policies, companies can better plan their supplier selection process. However, the priority of all these factors may differ according to the requirements of the organizations, and businesses should, therefore, determine the vendor selection criteria and then select a supplier accordingly. Companies can even start the process of supplier selection by analyzing the current suppliers of the organization.

Step 2: Determine supply performance

After selecting a suitable supplier, companies need to ensure that the supplier of choice does not suffer from significant compliance issues since it can impact the productivity of the organization. To do so, they should have an effective vendor selection process in place and conduct audits throughout multiple stages of the supplier selection process. Also, conducting audits beforehand will enable companies to determine the supplier’s strengths and weaknesses before the relationship becomes official.

Want to know how you can select suitable suppliers?


Know what your ideal supplier selection criteria should be and how can you enhance your supplier selection methods.

Step 3: Analyze financial factors

In recent times, financial analysis has become one of the most crucial steps in the vendor selection process. It helps companies to analyze overall supply base risk factors and choose suppliers on the basis of their financial strength and competitive advantage. Companies can even call for bids to gather information on the suppliers, the extent of their need, and the reasons why they are the best option for the organization.

Step 4: Create a contract

Creating a contract is perhaps one of the most crucial steps in any supplier selection process. Companies should use this as an opportunity to negotiate with top suppliers while keeping other suppliers on the list of potentials. After the agreement is reached, a contract can be created and signed. In many cases, the purchase order is considered a contract, but companies can even have a contract and then create a purchase order, depending upon the complexity of the situation.

Want to proactively define criteria for supplier selection?  Request a FREE demo below and know how our experts can help you enhance supplier selection.

 Accept terms and conditions
Request free proposal