Factors affecting the selection of a supplier

1) Assurance of Supply
Reliability of supply is becoming increasingly important to both buyers and suppliers. Hence,
suppliers who suffer recurring shortages themselves must be used with great care, regardless of
their other desirable capabilities. Suppliers who have assured, long-term source for their raw
materials and component parts should be favoured and developed.
2) Size of Supplier
Some purchasing authorities theorize that the size of an order should correlate with the size of supplier – receiving the order.
3) The Number of Suppliers
The number of suppliers to be selected for a particular line of products or group of items is another important factor that must be given careful consideration. Selecting one supplier for a particular product, no matter how reliable the source could be proves unwise in the long run. Similarly, selecting too many suppliers for an individual material may result in the buyer’s inability to fully tap the resources of these suppliers.
4) Developing New Source of Supply
In some cases a buyer is not able to select but must create a satisfactory supplier. If existing suppliers cannot satisfy a company’s needs, a logical alternative is to create a supplier that can.
Encouragement of this nature may involve setting-up or equipping such local producer financially and materially up to the level expected by the buyer.
5) Conflict of Interest
In selecting suppliers, buyers must be aware of conflicts of interest. A conflict of interest exists when buyers must divide their loyalty between the firm, which employs them, and another firm.
6) The Policy of the Buying Firm
A company’s policy may for example favour reciprocity, single or multiple sourcing. In purchasing, suppliers who patronize the buying company are given priority when it comes to selection of suppliers. Some companies makes it a matter of policy to reward indirectly, those customers that buy from them regularly and are found capable of performing certain jobs for the company.
7) Ethical Consideration
Buyers should keep themselves as free as is humanly possible from unethical influences in their
choices of suppliers. Gift from suppliers which are intended to influence buying decisions have no place in a professional purchasing department. In most cases, commercial bribery is a criminal offense.
8) Dishonest Suppliers.
Dishonest sellers exist in the industrial world just as they do in the consumer world. Purchasing personnel should be wary of dishonest suppliers and endeavour to avoid them. Their aim is to swindle the buying company.
9) Local Sources
It is always desirable to patronize suppliers located within the buyers’ immediate environment. This will help to promote good relationship between the local community and the company. It is only when materials in question are not available at the expected quantum that buying from distant source can be justified.
10) Government Policy
For the purpose of controlling foreign exchanges, government may for example, impose restrictions on importations of certain goods thereby preventing the sourcing of the goods in foreign supply markets. In such cases, the buyer’s range of sourcing is limited to the local market.
11) Others
Other factors, which for obvious reasons may be taken into account in supplier’s selection, can be listed as follows:
- Relative price of goods and services supplied by the supplier, compared with his
competitors.
- Delivery dates, methods and cost delivery. In many instances, the delivery element is more
important than price, provided the prices are within the boundaries of the main
competitors.
- Supplier’s reputation, especially within the industry or trade.
- History of labour relations at the supplier’s end.
- Financial solvency of the suppliers;
- Legal constraint, e.g. patent law

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Titany answered the question on November 24, 2021 at 13:04