How do you choose the right supplier? Avoid choosing the wrong supplier. Seriously, what characteristics should you be looking for? Here are the four pillars of good supplier performance: cost, quality, responsiveness, and technology.
1. Cost: Lowest total cost, rather than just price, helps firms evaluate the cost of doing business with a supplier and translates supplier performance into customer cost. Poor supplier performance costs money. Additional transactions driven by poor performance, extra communication about problems and problem resolution all impact overall cost to the customer.
2. Quality: Reliably defect-free product or service as defined by the customer. Excellent supplier quality helps reduce the cost of doing business with a supplier and increases market competitiveness. It also reduces customer complaints caused by poor supplier service or product quality.
3. Responsiveness: Ability to provide the right standard of service as defined by the customer. Includes reliability and willingness to respond to customer requests and requirements within a specified time frame. Some suppliers have the ability but not the motivation to be responsive if they perceive a customer to be a lower priority than other customers.
4. Technology: Sound technical capabilities to provide a product or service as required by the customer. Technology may include web-based technology or software, production technology, product or service development capabilities.
Supplier performance expectations typically address the first three pillars, at a minimum. Performance expectations make up the basis of criteria both for choosing new suppliers and evaluating current suppliers. High-performing, responsive suppliers have adequate internal resources, are financially stable, and have competent internal management. Also, alignment problems may cause even good suppliers may perform poorly. For example, a supplier may be too large or too small to provide products or services to a particular customer.
-Sherry R. Gordon