According to buyers, quality is the most important factor in supplier selection, while suppliers’ experiences show the decisive factor is still the price. Suppliers (60%) claim that for purchasing managers, price is still of the top priority, so they are able to accept minor deficiencies in quality. What is the importance of such criteria as TCO, supplier’s references and experience in supplier selection? – the results of the supplier selection criteria ranking in the “Buyers and Suppliers as Value Creators” survey give us the opportunity to verify those opinions.
According to suppliers, price is most important
Buyers are focused on two key objectives: savings they are able to achieve and quality requirements that have to be met by the purchased products and services. In the buyers’ questionnaire conducted as part of the “Buyers and Suppliers as Value Creators” survey, the quality of services was the highest-rating answer in the ranking of supplier selection criteria. In the total results, the price ranked on the second position. In contrast, suppliers’ responses, based on their experience, show the opposite. Suppliers claim that the majority of buyers focus on the price (60%).
The price criterion vs. TCO
There is a significant discrepancy between buyers and suppliers in terms of the total cost of ownership, TCO. Buyers ranked the total cost of ownership on the third place, while suppliers on the seventh, i.e. almost at the end of the ranking. In this case, suppliers’ answers seem to be reasonable, because preparing their price offers they get a closer perspective on this criterion. Perhaps, the discrepancy arises from buyers’ failure to recognise that a lower price at the beginning does not necessarily mean the most advantageous transaction and long-term benefits. Savings are still considered to follow from the price criterion, and to a lesser extent, taking a long-term perspective, from process savings or aspects related to the entire life cycle of a product.
References as a selection tool
Verification of suppliers’ experience was also highly ranked by respondents – in the fourth place by buyers, and in the third place by suppliers. Experience verification is usually based on references (taking into account the specific business of the company, the buyer typically requires sector or project references), and is an integral part of supplier qualification. The qualification process covers analysis of such areas as technical and manufacturing capabilities, financial situation, experience in the market or approach towards corporate social responsibility. In the survey, certificates and corporate social responsibility were ranked in last positions. Noticeably, their importance increases, but compared to other criteria, the two aspects still remain less significant. Although references ensure security of transactions and repute, they do not bring immediate effects, and their lack or negligence becomes evident in emergency situations. Large and well-positioned enterprises do not take the risk of collaborating with companies with unconfirmed reliability.