Organizations used to select suppliers based on a limited set of criteria, which often included their “gut feelings.” However, supplier selection has become much more
complex, with a range of new and expanding factors weighing
on decision criteria, not to mention an increasing arsenal of
technology that can improve selection processes.
This should not be a surprise: We have greater transparency
than ever before, into not only tier-one suppliers but the
broader supply chain. This level of visibility comes with an
increased responsibility to be data driven as well, especially
as supplier-selection processes incorporate more inputs
than ever. In many cases, specialized procurement solutions
(beyond Microsoft Excel spreadsheets) are becoming the glue
holding supplier-selection components together.
EXPANDING SELECTION CRITERIA
There is a range of standardized criteria that procurement
organizations tend to deploy in selection processes. On a core
level, these criteria can include past supplier performance
(such measures as quality, on-time delivery, service-level
adherence, and responsiveness to corrective action requests),
unit-cost pricing and total supply-cost elements.
However, most advanced procurement organizations use
additional criteria in strategic supplier selection. These external
elements can include supplier risk/stability considerations and
total supply chain costs (for example, costs that are inclusive
of logistics, inventory, working capital and qualification/
Leveraging technology can reduce
complexity and improve the process.
ISM Mastery Model®
Core Competency: Sourcing
BY JASON BUSCH