The ultimate guide to China sourcing and screening suppliers

By justchinait
 / 
December 16, 2020
 / 

How to initially select suppliers?

Different industries have different requirements for suppliers, and the selection of suppliers should be based on the industry’s special requirements and the company. The selection of suppliers should also be based on their own circumstances(such as affiliation, scale, the field of testing, financial status, etc.). So how does primary procurement choose suppliers? I am familiar with the following points and hope to be helpful to all supplier quality managers and purchasers.

Ⅰ.Influencing factors of supplier selection

Suppliers belong to an open system in the supply chain, so suppliers’ choices will also be affected by various economic, political, and other factors.

1.Quality factors

Quality is the foundation of the supply chain. The use-value of products is based on product quality. It determines the quality of final consumer products and affects the market competitiveness and market share of products. Therefore, quality is an important factor in choosing a supplier.

2.Price factors

Low prices mean that companies can reduce their production and operation costs and have an obvious effect on improving their competitiveness and increasing profits. They are an important factor in selecting suppliers. However, the supplier with the lowest price is not necessarily the most suitable, and many factors such as product quality, delivery time, and transportation costs need to be considered.

3.On-time delivery factors

Whether the product can be shipped to the agreed time and place on time will directly affect the continuity of the company’s production and supply activities.It will also affect the inventory levels of all levels of the supply chain and then affect the company’s response speed to the market, interrupting the manufacturer’s production plan and the sales plan of the seller.

4.Variety flexibility factors

In order to survive and develop in fierce competition, the products produced by enterprises must be diversified to meet the needs of consumers and achieve the purpose of occupying the market and obtaining profits. The diversification of products is based on the flexibility of the supplier’s variety, which determines the types of consumer products.

5.Other influencing factors

Including design capabilities, special process capabilities, overall service levels,project management capabilities and other factors.

Ⅱ.Basic principles for selecting suppliers

The basic principle of supplier development is the”Q.C.D.S.”principle,which is the principle of equal emphasis on quality, cost, delivery, and service.

Among the four, the quality factor is the most important. First, it is necessary to confirm whether the supplier has established a stable and effective quality assurance system, and then confirm whether the supplier has the equipment and process capability to produce the specific product required. The second is cost and price. Value engineering methods must be used to analyze the costs of the products involved and achieve cost savings through win-win price negotiations. In terms of delivery, it is necessary to determine whether the supplier has sufficient production capacity, whether human resources are sufficient, and whether it has the potential to expand production capacity. The last point, and very important, is the supplier’s pre-sales and after-sales service records.

Ⅲ.General steps for supplier selection

Suppliers play an important role in the supply chain, and the selection mechanism of suppliers is diversified. Therefore, when selecting suppliers, the decision-makers of enterprises must adapt to local conditions and conduct a detailed analysis of the enterprise’s internal and external environment according to the enterprise’s long-term development. Strategies and core competitiveness, choose theories and methods suitable for the company or the industry, and formulate corresponding implementation steps and implementation rules. Different companies have different steps when selecting suppliers, but the basic steps should include the following aspects.

1.Establish a supplier selection team

The purchasing enterprise will set up a special team to control and implement supplier evaluation. These team members are mainly from departments that have close cooperation with the supply chain, such as procurement, quality, production, and engineering. The team members also have certain professional skills.

2.Analyze the market competition environment

The company will know what the current product demand is,the type and characteristics of the product so as to confirm the customer’s demand and confirm whether it is necessary to establish a supply relationship.If a supply relationship has been established,it is necessary to confirm the necessity of changes in the supply cooperation relationship based on changes in demand,analyze the current situation of existing suppliers,and summarize the problems that exist in the enterprise.

3.Establish the goal of supplier selection

The company will determine how the supplier evaluation process will be implemented and establish substantive goals.

4.Establish supplier evaluation standards

The supplier evaluation index system is the basis and standard for a company to evaluate its suppliers comprehensively.It is an index that reflects the different attributes of the complex system formed by the company itself and the environment.It is an orderly collection of subordination and hierarchical structure.The evaluation of suppliers under different industries,enterprises,product requirements,and environments should be the same,but the evaluation criteria of suppliers should involve the following aspects:supplier performance,equipment management,human resource development,quality control,cost control,technology development,customer satisfaction,delivery agreement,etc.According to the enterprise’s actual situation and the supplier’s time span,the requirements for the supplier are also different.According to the length of time,there are corresponding short-term and long-term standards:

◎Short-term criteria for supplier selection

Good product quality,low cost,timely delivery,good overall service level(installation service,training service,maintenance service,upgrade service,technical support service),commitment and ability to fulfill the contract,etc.

◎Long-term criteria for supplier selection

Whether the supplier’s quality management system is sound,whether the supplier’s internal machinery and equipment are advanced and maintained,whether the supplier’s financial status is stable,whether the supplier’s internal organization and management is good,and whether the supplier’s employees are in a stable condition,etc.

When determining the criteria for selecting suppliers,short-term criteria and long-term criteria must be considered.Combining the two can make the selected criteria more comprehensive,and then use the criteria to evaluate suppliers and finally find the ideal supplier.

5.Supplier participation

Once the company decides to implement the supplier selection,the selection team needs to involve the suppliers in the selected design process as much as possible to confirm whether they have a desire to achieve a higher level of performance.

6.Selection of suppliers

The main task is to investigate and collect all-round information about the supplier’s production and operation.Based on the collection of supplier information,certain tools and technical methods can be used to select suppliers.

7.Implement supply partnership

In the process of implementing supply partnerships,market demand will continue to change.Companies can modify the supplier selection criteria in time according to actual needs,or restart supplier evaluation and selection.When re-selecting suppliers,the old and new suppliers should be given enough time to adapt to the changes.

Ⅳ.Supplier selection method

At present,the technical methods and tools that can be applied to supplier selection are mainly divided into three categories:qualitative methods,quantitative methods,and methods that combine qualitative and quantitative methods.Specifically,there are public bidding methods,negotiated selection methods,A.B.C.cost methods,and linear programming methods.,Analytic Hierarchy Process(A.H.P.),Fuzzy Comprehensive Evaluation Method,Neural Network Method,T.O.P.S.I.S.The method,Data Envelopment Analysis(D.E.A.),Component Analysis Method,Grey Comprehensive Evaluation Method and the integrated application method of these methods,etc.,manufacturing enterprises can Choose one of the methods to apply in your own actual situation.The commonly used methods are as follows:

1.Intuitive judgment

The intuitive judgment method refers to a method of selecting suppliers through investigation,consultation,comprehensive analysis,and judgment.It is a highly subjective judgment method,mainly listening to and adopting the opinions of experienced purchasers,or directly Judgement made by purchasing personnel based on experience.This method’s quality depends on the correctness and completeness of the supplier’s information and the analytical judgment ability and experience of the decision-maker.This method is simple and fast to operate,but it lacks scientificity and is limited by the level of detailed information.It is often used to select suppliers of non-main raw materials for enterprises.

2.Evaluation and selection method

On the basis of fully investigating and understanding the suppliers,conduct a serious assessment,analysis and comparison to select suppliers.

Supplier investigation can be divided into preliminary supplier investigation and in-depth supplier investigation.The survey respondents at each stage have a question of supplier selection,and the purpose and basis of the selection are different.

The selection of the subjects of the preliminary supplier survey is very simple.The basic basis is the variety and specifications of their products,the quality and price level,production capacity,and transportation conditions.The selected suppliers among these suitable conditions are the objects of the preliminary supplier survey.

The selection of in-depth supplier survey objects is based on the suppliers of key products and important products that affect the enterprise.These suppliers must be thoroughly studied,inspected and evaluated.The selection criteria are mainly the strength of the enterprise,the production capacity of the products,the technical level,the quality assurance system and the management level.

After the assessment and evaluation of each evaluation index,a comprehensive evaluation must be carried out.Comprehensive evaluation is a comprehensive score obtained by weighted average calculation of the above indicators,which can be calculated by the following formula:

S=∑WiPi/∑Wi×100%

Among them:S is a comprehensive index;Pi is the i-th index;Wi is the weight of the i-th index,which is subjectively set according to the relative importance of each index.S is a comprehensive description of supplier performance.The higher the value,the better the performance of the supplier.

Through the trial operation stage,after obtaining the comprehensive results of each supplier,the supplier can basically be finalized.

3.Tender selection method

When the quantity of purchased materials is large and the supply market is highly competitive,the bidding method can be used to select suppliers.The purchaser,as the tenderer,puts forward the purchase conditions and requirements in advance,invites many supplier companies to participate in the bidding,and then the purchaser selects the best transaction objects in a one-time basis according to the prescribed procedures and standards and proposes the most favorable conditions for the bidder to sign Agreement and other processes.Note that the whole process requires openness,fairness,and merit.

4.Negotiate selection

When there are many suppliers to choose from,and it is difficult for the purchasing unit to choose,the method of negotiation can also be adopted;that is,the purchasing unit selects several suppliers with more favorable supply conditions,negotiates with them separately,and then determines the appropriate supplier.Compared with the bidding selection method,the negotiation selection method is more guaranteed in terms of product quality,delivery date,and after-sales service because the two parties can fully negotiate.However,it may not be the cheapest and most favorable supply conditions due to the limited range of options.Supplier.When the procurement time is tight,there are few bidders.The competition between suppliers is not fierce,and the specifications and technical conditions of the ordered materials are more complicated.The negotiation selection method is more appropriate than the bidding selection method.

Ⅴ.Points to note when selecting suppliers.

1.Self-made and”outsourced”procurement

In general,the higher the rate of outsourcing,the greater the chance of choosing a supplier,and the main target is professional manufacturers who can divide labor and cooperate.Through outsourcing,companies can focus their energy on core capabilities and avoid dispersal.

2.Single supplier and multiple suppliers

A single supplier means that a certain item is ordered from one supplier.The advantage of this purchase method is that the relationship between the supply and demand parties is close,the quality of the purchased items is stable,and the purchase cost is low;the disadvantage is that it cannot be compared with other suppliers and is easy Losing quality and price more favorable suppliers will have less flexibility in purchasing.In addition,if the supplier has problems,it will affect the company’s production and operation activities.Multiple suppliers refer to the items needed for multiple orders,and their advantages and disadvantages are just the opposite of those of a single supplier.

3.Domestic Procurement and International Procurement

Choosing domestic suppliers may have relatively low prices.Due to geographical proximity,on-time production or zero-inventory strategies can be achieved;international suppliers may purchase items that domestic enterprises cannot reach,improve their technical content,and expand supply sources.

4.Direct purchase and indirect purchase

If it is a large-scale purchase or the required items have a significant impact on the production and operation of the company,direct purchase should be used to avoid middlemen’s price increase and reduce costs;if the purchased quantity is small or the purchased items have little impact on the production and operation activities,indirect purchases should be used.Purchasing,saving enterprises’purchasing energy and expenses.

5.Avoid lack of scientific selection methods

At present,many enterprises in our country have imperfect management systems and lack of scientific methods for selecting suppliers.As a result,when selecting suppliers for most projects,they often refer to various written materials and self-introductions provided by the suppliers themselves,and The reputation in the market,or on the basis of individual subjective conjectures,choose suppliers to participate in the bidding,so when choosing suppliers, human factors are relatively large.In addition,in terms of the criteria for selecting suppliers,the current selection criteria of companies mostly focus on the supplier’s product quality,price,flexibility,delivery punctuality,lead time and batch size,etc.,without forming a comprehensive supplier evaluation index.The system cannot make a comprehensive,specific and objective evaluation of suppliers.Such problems should be avoided as much as possible.

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