Identifying and Selecting Suppliers for Strategic Global Purchasing

VI.2. Research, Evaluate, Interview, and Select Suppliers

Then, contact all listed companies through air mail, fax or email. Clearly state your business proposition, your objectives and the procedure of supplier selection.
Once prospective suppliers have indicated their interest in your offer, it is important to determine their legitimacy and financial soundness. The financial condition of prospective suppliers should figure heavily when determining the appropriate working relationship. Some of the respondents will certainly not pass this stage of the selection process.

The survivors of this first screening, should undergo further research based mostly on their past performance.
After the financial test, past performance should be an important part of your supplier qualifications process.
Find out how the supplier’s performance ratings compare with average satisfaction scores for its industry and with our own goals.

Contact randomly selected customers of your prospective supplier and asks them to rate that supplier on key performance measurements, such as:

- Delivery timeliness

- Problem responsiveness

- Product quality

- Total cost

- Technical support

- Quantities delivered

- Personnel attitude

Calculate an overall satisfaction rating from ratings in the key performance measurement categories.
Then, illustrate the supplier’s performance ratings compared to each other and identify each supplier’s weaknesses and strengths.
Finally, rank your prospective suppliers to create a list of preferred suppliers based, this time, on acceptable risk and your internal standards.

To this list of preferred suppliers additional information should be gathered on them, such as:

- Can the product be manufactured from the present facilities or will an additional production capability be required?

- Does the present manufacturing operation have the capacity to handle the anticipated level of orders?

- Does the company have the operational flexibility to switch, particularly if the product's specification varies or is subject to minimum volume requirements?

- For service companies, is the requisite expertise available in the potential overseas supplier markets?

- Will the company have to send home office staff or station expatriate personnel abroad in order to global purchase?

- Are the services subject to professional licensing or other forms of regulatory oversight?

The following, and most important, step will be to establish relationships with the preferred prospective suppliers. This should involve face-to-face meetings with the principals.

In addition, you need to negotiate the appropriate legal agreement with the counterpart firm selected.

Some tips in your search and evaluation of prospective suppliers if you do not have in-house resources or if you are not using an international business consultant:

- Credit Reporting Firms - Firms like Graydon America and Dun & Bradstreet offer timely credit reports on overseas companies.
The fee for these reports typically varies according to the region of the world and the promised delivery time for the report.

- Dun & Bradstreet also maintains a Web site where users can order Business Background Reports on-line.