Supplier qualification is an important stage of the purchasing process. The buyer’s intent is to obtain information about suppliers and their capability to deliver the goods and services of required quality. Sellers should perceive this stage of collecting data by potential buyers as an opportunity to present their business potential to its best advantage. What is the key to efficient communication?
What is the goal?
It is essential to recognise the goal of the qualification process, which is to eliminate from commercial transactions the suppliers who involve too much risk. Buyers do not wish to deal with companies that provide:
- incorrect quantities of products,
- products in a wrong time and place,
- products or services that fail to comply with the negotiated specifications or prices.
Prevention in supplier selection
However, supplier qualification does not necessarily have to be conducted as a part of a purchasing procedure. It may be separated from purchasing and serve as the basis to create and update the Base of Qualified Suppliers that contains a list of potential suppliers who may be approached whenever it is necessary. Apart from updating the database, the qualification during a purchasing process usually means that the supplier will also be selected in the subsequent stages for signing an agreement – a pattern of a specific purchase will be presented below.
RFI – the seller’s opportunity
A fundamental tool for collecting information about suppliers is a request for information, RFI. Buyers create a document template that is then sent to suppliers, including the current ones if the information buyers already have about them is insufficient. The role of sellers or other responsible persons (for example, employees from different departments) is to fill out the requests with necessary information. Is should be remembered, that the buyer is interested in obtaining accurate data often covering a wide range of topics.
What areas are explored in a RFI?
- Technical and production capabilities – questions relating to the use of production capacity, quality management systems, the level of expenditure on research and development, the way of dealing with clients if the delivered products fail to meet requirements.
- Financial situation – questions about financial data that will be helpful in determining the company’s ability to perform its obligations and will reflect its profitability – it is particularly important when the buyer is interested in a long-term relation.
- Market experience – questions about the time of the supplier’s presence in the market, its contacts with other clients, implementation of a certain type of projects, distribution channels, minimum and maximum contract values which a supplier is willing to accept to start cooperation, etc.
- Approach to corporate social responsibility – this part may include questions about the recycling or waste utilisation policy, about the preference to cooperate with suppliers that meet certain environmental standards and requirements, or about quality tests of products or services.
The extent of questions presented above is only an example of data collected by buyers. The questions are at the sole discretion of the buyer, who takes into account the targeted supplies that meet his requirements. Additionally, the received data may be used to update the Base of Qualified Suppliers. In other words, RFI is a form of a market research.
RFP – Request For Proposal
The database may also be extended using requests for proposals, RFPs, that enable the buyer to collect information from suppliers in connection with a particular offer. As a request refers to a specific offer, the buyer may obtain in-depth information about suppliers and their conditions. The analysis of responses to RFPs has a significant influence on supplier selection, because it limits the number of suppliers, so that the buyer may start negotiations with the best enterprises based on the information included in RFPs. The persons responding to RFPs and RFIs may highlight individual elements to increase the probability of selecting their company as a supplier.
What is important in the final stage of selection?
The principal result of supplier selection is obtaining the best purchase conditions for products and services that fulfil the enterprise’s needs. However, before the parties start negotiations to reach an agreement and sign a contract, the buyer needs to apply certain assessment criteria to decide which suppliers should be invited to further discussions. If an offer meets the technical and quality requirements, it is assessed in terms of objective criteria, including the price for the services and company’s experience in carrying out a certain type of projects.