The Vendor Selection Process
How to Select a Vendor Formally?
The vendor selection process is probably one of the most important tasks that a business will undertake. Without good vendors who provide your quality stock, business services and company supplies at competitive prices, with good terms and delivery schedules, your company’s bottom line and profits will be sorely compromised.
Two Vendor Selection Processes
The process to selecting a vendor can be trying and vexing for many companies. To simplify there are two ways that you can select your vendors:
- By choosing directly.
- By letting vendors tender for your work.
The first option, choosing your vendors directly, is the most common option. Vendors usually tender for more complex and ad hoc work as well as contracts that will last for a year or more.
Requirements for a Proper Process to Selecting a Vendor
Whichever option you choose to use, your must first analyze your requirements:
- What products do you require?
- What quality levels are you seeking?
- What stock levels do you require?
- How often do you require delivery?
- What price points are you seeking?
If it is a service that you are purchasing then your requirements should be far more detailed, after all you want to ensure that you are getting exactly what you wanted in your vendor selection process.
The Easy Process to Select a Vendor
If you have decided to choose one or more vendors then your vendor selection process becomes that much easier. Start by identifying a number of vendors that should meet your demands. Ask them for their catalogues. If you are a reasonably large company, this request will be answered with a suggestion that a sales representative visits you.
Don't Pay List Price When Selecting a Vendor - Negotiate
This is your chance to negotiate good price levels and terms. No one ever pays list, however small they are. Once you have decided on your vendors, you should set up a Master Agreement that sets out the price, terms, delivery times and product ranges or services that have been agreed. You now have a group of vendors to work with.
A More Complex Vendor Selection Process - Tendering
If you are tendering for suppliers then the process to select a vendor is a little bit more complex. Once again you start with your detailed requirements. Now you produce a Request For Proposal (RFP) detailing your requirements, delivery expectations and your terms and conditions.
You can then post this on any number of web sites or publish them in the appropriate magazines.
Get Bids & Then Negotiate Even When Selecting a Vendor Through Tenders
You should then receive a number of bids to provide the goods or services that you are requiring. Now is the time for you to evaluate each of bids, best undertaken in a formal manner, with the intention of choosing your new vendor or vendors.
There now follows a period of negotiation with your chosen vendors and the signing of the Master Agreement.
Whichever route you choose, you are entering into a formal business contract with your new vendors so your process regarding vendor selection must be detailed, formalized and understood by all parties.
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