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Is Your Vendor Selection Process Working?

Updated on March 11, 2015

Vendor selection should be a fairly straightforward process, but often it isn't. What you should know is whether or not your vendor selection process is working for you. Here are the basics to selecting a vendor.

Choosing a Vendor

There really only two ways you can choose a vendor. One is by choosing the vendor directly. The other way is to let different vendors bid for your work. In small to medium businesses choosing directly tends to be the norm. Having vendors bid for work is usually the purview of larger corporations and government contracts. However if you do open the job up for bids, enough companies have to know about it to make it a meaningful process. Otherwise, you may only have one or two companies vie for the job and neither one might be qualified.

How to Determine Your Requirements

The first step in vendor selection is determining your requirements. Whether it's products or a particular task fulfilled, you're going to want to understand what your requirements are. Without establishing requirements, you will have no idea whether the vendor can truly fulfill them. Questions you should ask yourself include:

  • What is the product or job you need?
  • Does this product or job need special expertise or a special production run?
  • If it is a product, do you need to maintain an inventory?
  • How often do you need to use this product, or if it is a job, is it an ongoing task?
  • How much can you afford to pay for this product or service?
  • If this is a product, how often do you require delivery of it and how much stock do you need?
  • If it is a service, how often does it have to be performed?

How to Locate the Right Vendor

Locating the right vendor can sometimes be difficult. It's best to ask for referrals from vendors and colleagues whom you already trust. You may already have an idea as to who might fit your needs as a vendor, but if you don't and if you do not have recommendations, you may have to do some research either on the Internet or even through the local phone books, if you're a small business. You should then ask for either catalogs or sales representatives to contact you so that you can get the proper information you need.

Making the Right Vendor Selection

After you have found a group of vendors you think may work for you, the first step is to see if your potential vendor fulfills all the requirements you've established above. Your potential vendor should not only fulfill all the requirements, but even exceed them. This allows you to choose a vendor who may be able to fill future requirements as well.

Besides fulfilling your requirements, your potential vendor should:

  • Produce a quality product.
  • Be reliable. Your vendor needs to have a proven track record of reliability.
  • Provide the best service or the best product for the money. Cheap isn't always best. If the quality isn't there, the product or service is no value.
  • Be solvent. If the company goes out of business tomorrow, it's likely to leave you scrambling to find a new vendor.
  • Communicate with you often. You need to know if something goes wrong or if there's a problem before it becomes a problem for you.


Lastly, you need to negotiate your price. Settling for list price isn't good business sense. Since you'll be using the vendor frequently, it will behoove the supplier to give your company a discount.


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