VI.A Supplier Selection
The process for selecting new suppliers should be based on the type of product or service being purchased, uniqueness of the product or service, and total cost. For example, if the item is a standard product (available off the shelf) and does not have a critical impact on the purchaser’s performance, then purchase price and availability may be all that needs to be considered. Selection may be as easy as finding companies listed in the yellow pages or an industrial directory and requesting a quote. An example of such a product might be standard office supplies; for a service organization it might be a lawn care service.
This simple view, however, does not suffice for the many purchased products and services that will have a significant performance impact. Aluminum billets for an extruder of automotive brake parts, a new university online research database, or equipment maintenance for an airline—these are examples where the qualification and selection process must be carefully thought through and carried out. In some cases customers may dictate that a particular supplier be used (as is typical for steel used to make automotive components). But in most cases the purchaser must define what criteria will be applied, then make a final decision to determine ways that prospective suppliers will be evaluated against the criteria.
Supplier selection criteria for a particular product or service category should be defined by a cross-functional team. In a manufacturing company, team members would typically be from purchasing, quality, engineering, production, or materials management. Team membership could consist of personnel with technical/applications knowledge of the product or service to be purchased, as well as members of the department that will use the purchased item.
The issues to be used to create the selection criteria will typically include the following:
- Previous experience and past performance with the product/service to be purchased
- Relative level of sophistication of the quality system, including meeting regulatory requirements or customer-mandated quality system registration (for example, ISO 9001, IATF 16949)
- Capability to meet current and potential future capacity requirements and at the desired delivery frequency
- Financial stability of the supplier
- Technical support available and willingness to participate as a partner in developing and optimizing design and a long-term relationship
- Total cost of dealing with the supplier (material cost, communications methods, inventory requirements, incoming verification required)
- Supplier’s past track record for business performance improvement
- Supplier’s code of conduct and ability to be socially and ethically responsible
Methods for determining how well a potential supplier fits the criteria include:
- Obtaining Dun & Bradstreet or other available financial reports
- Requesting a formal quote, which includes providing the supplier with specifications and other requirements (for example, testing)
- Visits to the supplier by management and/or the selection team
- Confirmation of quality system status either by on-site assessment, a written survey, or request for a certificate of quality system registration
- Discussions with other customers served by the supplier
- Review of databases or industry sources for the product line and supplier
- Evaluation of samples obtained from the supplier (for example, prototyping, lab tests, validation testing)
Quality Management BOK Reference
VI Supply Chain Management
VI.A Supplier Selection - Define, develop, and use criteria for selecting suppliers, including internal rating programs and external certification standards. Assess and manage the impact these programs can have on various internal processes of the organization.
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