The Factors Involved in Selecting the Right Supply Chain Relationship
The supply management put forward the role of purchasing as it enhances competitiveness and effectiveness in leading a business. Supplier selection consumes much time as it presupposes a thorough assessment of quality, cost, delivery system, facilities, elaborate logistics, and adequate finance, etc. Choosing the right supplier is a complex process as it demands considering several criteria.
The first factor that influences the selection of the supplier is cost. The criterion is to identify the vital part of value related to the purchase. Usually, transportation costs, purchase price, and taxes are related to the cost. The operational cost must be considered as well, as it directly deals with transactions and the cost of their rejects. Therefore, the price and distribution cost are crucial elements to account for while selecting a supplier.
Profit maximization can be achieved by minimization of the cost. The next criteria are named technical capability. It implies that the competent technical ability must be ensured to produce high-quality service and goods and to provide future improvements. It is highly essential when a firm is developing new technology to enter the global market.
The potential technical capability should be measured to identify whether the supplier can meet the needs of the buyer’s production plan and release the product in conformity with the market standards. Compliance with quantity, due date, packaging standard, and plant layout is the basis for this criterion.
Quality assessment is also observed as a significant factor affecting the supplier’s selection as it sustains and improves the quality and delivery execution. The quality and availability of the product rely on this factor. Quality planning, assurance, management commitment, and some other dimensions are the basis for this criterion.
The following aspect is the organization profile, which is gauged based on achievements of marketing and organizational goals, financial performance, and strategy for the technology age. The reliable supplier usually owns accredited corporate standards and practical coordination skills.
The next factor comprises service level, which is based on the delivery time, lead time, and ease of communication. Delivery or shipping is the primary factor that affects choosing a vendor in modern times. Moreover, the style of communication varies from country to country, it is important to select a universal proficient communicative strategy to establish a long-lasting partnership. These attributes are the primary criteria to be considered. The principle of the supplier’s profile is defined by financial status, customer response, and performance history.
The last point to view is risk factors that determine the supplier’s geographical location and political stability. These aspects are important as the location, and the political conditions may affect the procurement of the products and materials.