the doctor recently came across an article that said that during the sourcing process, there are many qualitative attributes that procurement teams should take into consideration and that sourcing is about the lowest price, but identifying the greatest value for your sourcing dollars and that one should incorporate multi-factor award criteria into an automated sourcing process. All true. It also provided some examples of the most frequently used qualitative factors, which include:
- Supplier Market Share
- Supplier Performance
- Production & Delivery Capabilities
And these are okay, but they don’t tell the whole story. Plus, sometimes the story they tell is not the right one. For example:
- with respect to supplier market share, you only care that the market share is big enough to make the supplier financially viable … sometimes the emerging suppliers have the best technologies for you
- with respect to supplier performance, if you haven’t used the supplier before, and the only data you have is negative data from customers that have gone public, you don’t know if this is the typical experience or an anomaly (like 1 out of 100) and sometimes even how recent the data is
- with respect to production and delivery capabilities, there’s always a third party partner for delivery
That’s why you need to round out the supplier evaluation components, going beyond the typical, and obvious, evaluation factors, if you want to find the best suppliers for now and the future. Some other factors to consider are:
- Innovation Capability do they have a track record for innovation and helping customers improve their designs, robustness, product longevity, etc.
- Corporate Social Responsibility the best supplier from a product perspective could be the worst supplier from a corporate perspective if that supplier uses child labour in the supply chain or buys blood diamonds for their x-ray machines and the story breaks
- Environmental Risk Profile that examines the supplier from a geo-location, social and political, and economic context which are out of the control of the supplier (whose financial, technological, performance, etc. risk you will be qualifying separately)
And these are valid for all suppliers. When you get into specific categories, you might also want to consider:
- Services Capability can they support the product, offer consulting services around the product, or streamline the production process beyond other suppliers
- Six Sigma Black Belt can the supplier help you with your design process or streamline your new product development
- Supplier’s Supply Chain Design
is their supply chain more efficient than their peers?
So if you want the best supplier, go beyond the obvious in evaluation.