Evaluating new Suppliers

Understanding how to select a new supplier id very dear to our hearts at Our ultimate aim is to make this process as simple and straightforward as something so complex and fraught with unknowns can be.

Start with the basics

This may seem like obvious advice, but the first step to evaluating any group of options and making a decision is to list out and prioritize the criteria you are going to consider.

Generally the criteria will form two groups:

  • Regulatory or other minimum requirements
  • value-add attributes.

Regulatory or minimum requirements only apply during the process of shortlist creation, they are a simple yes/no answer they either meet the criteria and go on the shortlist or they don’t and we can forget about them.

Examples of regulatory criteria can span from minority ownership rules to minimum technical specifications. These tend to be governed by Mandatory Standards, see our Standardizing on Standards article.

The value-add criteria are the attributes that can be balanced against each other and cause a lot of deliberation of “picking the right one”. This is where prioritization come in.

Build a criteria scorecard

For selecting suppliers, evaluation attributes usually boil down to the following 7 criteria:

  1. Cost
  2. Quality
  3. Service and Performance
  4. Agility
  5. Social and Environmental Factors
  6. Risk
  7. Convenience

Of course the deeper you go into an industry you could add more specific attributes but they would likely be able to be generalized up to one of the 7 above, e.g. when evaluating software you may look at number of features and support SLA’s, which would generalize to Quality and Service respectively.

Cost is not king

It’s a false assumption to assume that Cost is always the top priority, though of course it’s frequently where the most pressure is placed.

Consider the following common cases:

  • A higher quality product is not usually the cheapest.
  • The lower risk supplier tends to be the least Agile.
  • The most convenient and best service may not be the most environmentally friendly.

The priorities differ from organisation to organisation and usually from person to person, make sure to fully establish your criteria before you compile your shortlist, to avoid being swayed by the tons of marketing reading that accompanies the information gathering task.