The Art of Selecting a Supplier

The process for choosing the right supplier has never been easy or straightforward, and in today’s fast moving world with myriad global surprises and challenges, it certainly has not gotten any easier. Many people often ask “What supplier do you recommend for X?” (Plug in your favorite product category or industry in for X). Unfortunately, it’s not a simple answer where I can say “For X, you need to go to Y factory.” Many factors should be considered when deciding which supplier is the best for you and your team—that’s right, for you and your team.

Obviously, it’s important to make sure that the supplier has a good Quality Management process in place that will meet your needs and a price that works for your budget. Similarly, assessing the basic capabilities of your candidate suppliers to validate that they have all of the capabilities that you anticipate needing in the next few years is critical. Additionally, making sure that the supplier has the financial resources that you need so that they can extend credit if you anticipate the need for that is important. These assessments, while necessary, are just the beginning. These are the checklist parts of supplier selection, and they must be done and done well, but there is more.

First, it’s important to understand that the right choice for the largest mobile phone maker in the world is almost certainly not the right choice for the next startup entrepreneur ready to launch the next hot product. The two organizations are vastly different, the level of product maturity are worlds apart, and the support teams at a huge mobile phone maker are much larger than the 2 interns and the grizzled mechanical engineer that a start up is likely to be able to commit to their supplier during the critical ramp up period. Startups and new products need special support and extra flexibility in the early phases and tend to have a slower ramp up. It’s important to find a supplier who can work with that, and at the same time not let everything run off the rails by being too flexible. I have seen clients put out in the very back building with the leaky roof of top tier suppliers and given a whole new support team overnight after asking for a few too many changes during ramp up and getting crossed with the factory’s senior production management.

Next, it’s also important to understand what your supplier perceives your value to be as a customer and make sure that that matches up with reality. If your supplier views you as a huge cash infusion, and you’re looking at a slow ramp up on a cost challenged product, eventually there will be some resolution that is likely to leave at least one side with a bad feeling. Make sure you get a chance to ask the senior management of your candidate suppliers why they want your business and probe a little deeper. Are they trying to build up business in your particular sector? Do they want to diversify their customer portfolio and you fit well with that? Has the supplier made a strategic decision to invest in the new technology that your product relies on? If the only reason that you can get out of them for wanting your business is the money, then buyer beware…

It’s also important to gauge the involvement of the suppliers senior management in the business. Are they in the factory and walking the production line every day or every week, or are they out playing a few rounds of golf every week and calling in once or twice a week to check their messages? It’s far better to be working with a management team that is conscientious and looking to build their business up and looking for partners more than customers. You want a partnership too and it’s important to understand on a person to person and team to team level who you would be working with before you make your final decision on a supplier.

There is no perfect supplier for all occasions, just like there is no perfect customer. A good partner that will grow with your team and your needs is the goal. A partner that meets your needs today and is likely to keep up with you in the future, a partner who will bring skills and capabilities to the relationship that you do not have, and even challenge you and your team to get better is a true partner. Good suppliers are good partners.