One of procurement’s most important duties has been identifying and aligning their organizations with reliable suppliers. These sources not only have to meet shipping timelines, pricing parameters, and quality standards, but the best ones also have to be able to do this over and over again on a long-term basis (unless it’s just about the spot buy, that is).
Finding good candidates that can meet all of these requirements has never been easy, but for today’s electronics buyers the task has become especially onerous. Trade wars, tariff issues, the increasingly-global business environment, counterfeiting, component shortages, and other outside forces can all take a toll on one of procurement’s foundational capabilities: securing and working with the best suppliers.
“When most buyers plan on identifying a new supplier, they are usually tempted to focus on the best price. However, concentrating only on low costs can hurt you in the long term,” ThomasNet points out in “12 Sourcing Tips to Identify Quality Suppliers.” “That's because shaving a few cents off the price of a product is no help if the quality is below standard and the component or material does not arrive when you need it.”
6 Rules of the Road
By factoring these and other important considerations into the supplier vetting process, buyers can begin to develop a 360-deg. view of the companies that they’re procuring products and services from. This, in turn, assures that price alone isn’t the determining factor. Here are six ways to do that with every new seller:
- Check their certifications. Many buyers have minimal requirements when it comes to supplier quality certifications. “However, suppliers do not always make it easy to view and verify their certifications,” ThomasNet points out. “Discover suppliers that are certified to your quality standards, including ISO, QS, and more.”
- Align manufacturing and shipping locations to your organization’s needs. Depending on your manufacturing requirements, you should determine your need for a multi-location supplier or a single warehouse. “Obviously, shipping capabilities and associated costs will differ by the number of locations a supplier has to offer,” ThomasNet states, noting that you may be able to negotiate a better price from a smaller business with a single location or string multiple suppliers together to meet your needs.
- Look for expertise in your product type and target market. A supplier is more likely to be familiar with common quality issues related to your product if they have experience manufacturing a similar product. They’re more likely to be able to identify and fix problems proactively before those problems affect a large portion of the order. “If the factory is experienced in exporting to your target market, they’ll also be relatively familiar with your quality and legal requirements,” Oliver Knack writes in “Looking For Suppliers? 10 Qualities Of The Best Suppliers.” Knowing that most factories specialize in single product types or categories, Knack tells buyers to check suppliers’ Alibaba profiles for clues about what they’re exporting or specializing in.
- Find out if they can make enough of what you need. “The supplier needs to have enough capacity to handle your firm's requirements,” MindTools advises in “Carter’s 10 Cs of Supplier Evaluation.” “[Basically], how quickly will it be able to respond to these, and to other market and supply fluctuations?” Don’t forget to also consider all of the supplier's own resources. Does it have the resources to meet your needs, particularly when commitments to other clients are considered? (These resources include staff, equipment, storage, and available materials.)
- Evaluate the geopolitical climate. While some overseas resources may offer you rock-bottom prices, ThomasNet warns that tenuous labor relations or political upheaval can leave you without your required product. “Take the time to thoroughly analyze the potential for unrest in the areas that you will potentially rely on for the success of your supply chain.”
Check your supplier’s financial health. Your supplier should be in good financial health. “Cash-positive firms are in a much better position to weather the ups and downs of an uncertain economy,” MindTools advises. “So, does this supplier have plenty of cash at hand, or is it overextended financially? And what information can the supplier offer to demonstrate its ongoing financial strength?” These are all important questions to ask before engaging with a new supplier (or, working more extensively with an existing vendor).