Supplier selection: 7 steps for the selection and management process

The first step in selecting suppliers is to choose partners whose objectives are aligned with those of your company. An assertive choice is essential for any business to operate harmoniously, since both parties depend on each other in this commercial relationship. This selection is only the beginning of a good relationship between the company and those who supply the products or services.

That said, beyond selection, supplier management plays an important role in this whole process. For example, how can we define which factors should be considered in the selection and management of the energy suppliers?

Continue reading to better understand this management concept and check the tips for supplier selection. Happy reading!

What is supplier management?

Supplier management is related to supply chain management, including selection, evaluation, relationship, and monitoring of all activities.

Thus, this professional will not only choose the supplier but also participate in all inventory monitoring and the creation of a purchasing policy that is aligned with your company's compliance and validated by the legal department.

There are various techniques for a professional to put into practice the best negotiation strategies with their suppliers. These skills can be studied and practiced, and they ensure that the company achieves excellent commercial results in negotiations.

For example, a professional with negotiation skills will be better equipped to close good deals that involve possible discounts and payment terms that are more advantageous for the operating company.

How to select good suppliers?

There are a series of steps to be analyzed to select good suppliers. Here, we list 7 important tips when making the selection and suggest best practices. Check them out!

1. Conduct a detailed research

To select good suppliers, the first step is to conduct a detailed research of the companies that provide the product or service you are looking for. This initial research can be done via the internet or by attending specific fairs to find what your company needs.

When researching suppliers, start by listing the options you found. Then, evaluate as many factors as possible, comparing each supplier you found in your search, such as:

• The results you intend to achieve with this new partnership;

• The existence of synergy with your type of business;

• The prices charged by the suppliers;

• The delivery time of the products after the purchase order is placed;

• The payment terms;

• And the working methods of each supplier.

2. Check the supplier's credibility

This step reduces and even prevents potential risks related to choosing a particular supplier. This is because having a history of them in hand increases the chances of selecting a supplier who has not had, for example, delivery delays or sold products of lower quality than agreed.

Thus, this research can reduce possible unforeseen events and can be done in a simple way that we will explain below.

This credibility check of the supplier can be carried out through a reference survey. To verify credibility, contact companies that have commercial partnerships with such suppliers.

In this check, it is necessary to understand the following factors: transaction history, financial, legal, reputational, or compliance risks — a set of measures implemented by companies aiming to prevent legal risks arising from the exercise of their own functions.

Additionally, try to find out if any of the consulted companies have already terminated the contract and, if the answer is yes, clarify the reasons. On that occasion, take the opportunity to learn the strengths and weaknesses of this supplier.

3. Analyze the quality of supplied products

Verifying the quality of the products marketed by suppliers is essential, since these goods will be sold to your customers. Therefore, it is important to always request samples or pilot pieces of what is purchased and conduct a thorough analysis of color, quality, material, etc.

4. Check whether deadlines and deliveries are met

Before formalizing a partnership with a new supplier, show them what your company's needs are regarding deadlines and deliveries so that they are met. Additionally, verify whether this supplier operates with minimum delivery quantities and special conditions to ship the product.

Remember: when a supplier delays delivery, the shipment to the customer will also be delayed, and in such cases you may be harming yourself, losing sales, and negatively affecting your customer service.

It is essential to inform the supplier — even before forming the partnership — of your delivery demand. It is crucial that the supplier of products to your company be flexible and able to meet your business needs in cases of unforeseen events or extra demands.

5. Verify that negotiations are transparent

The best way to manage risks that may occur in the supply chain is to maintain a commercial relationship with suppliers that must be based on trust and transparency.

6. Analyze the prices charged

When selecting suppliers, another important tip is to remember that the amount spent on these partners must necessarily be less than the revenue you receive from your sales. Only in this way can you cover your costs and still earn the intended profit.

Finally, remember that you can negotiate prices and payment terms with those who supply the product or service offered. For example, obtain discounts when you buy from suppliers in large quantities or when the payment method is cash.

7. Check the support offered

The last tip for supplier selection is also essential. Pay attention to the support and service of the suppliers being evaluated. Thus, check:

• what support channels are offered;

• speed and humanization in service;

In this text, you saw the main precautions when selecting suppliers and the importance of managing them. We hope our tips are useful in forming partnerships between your company and the suppliers!

Now that you know how to select the best suppliers, learn how to carry out the electricity management in the Free Energy Market!