Why must buyers continue to develop new suppliers?

By justchinait
November 23, 2020

The development and management of suppliers is the core of the entire procurement system, and its performance is also related to the performance of the whole procurement department.

Generally speaking, the contents of supplier development include:

1. Supply market competition analysis,

2. Looking for qualified suppliers,

3. Evaluation of potential suppliers,

4. Inquiry and quotation,

5. Negotiation of contract terms,

6. The choice of the final supplier.

In most multinational companies, 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 these four, the quality factor is the most important.

1. To confirm whether the supplier has established a stable and effective quality assurance system,

2. Confirm whether the supplier has the equipment and process capability to produce the specific product required.

3. Costs and prices. Value engineering methods should 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 adequate, and whether it can expand production capacity.

4. Also very important is the supplier’s pre-sales and after-sales service records.

In the process of supplier development, it is first necessary to conduct a competitive analysis of a specific regulated market, understand the market leader, the current development trend of the market, and the positioning of major suppliers in the market.

The most important thing is to make a preliminary selection of suppliers. It is recommended to use a unified standard supplier registration form to manage the information provided by suppliers.

This information should include the supplier’s registered place, registered capital, main shareholder structure, production site, equipment, personnel, main products, primary customers, production capacity, etc.

By analyzing this information, it can evaluate its process capability, supply stability, resource reliability, and comprehensive competitiveness. Among these suppliers, after excluding those unsuitable for further cooperation, a supplier inspection list can be drawn.

Next, to arrange site visits to the supplier, this step is crucial. When necessary, the quality department and process engineers can be invited to participate in the audit team. They will bring professional knowledge and experience, but the joint audit experience will also help the company’s internal communication and coordination. In the field visit, a unified scorecard should be used for evaluation. The review of its management system should be emphasized, such as work instructions and other documents, quality records, etc. The requirements are comprehensive and cannot be omitted.

The more important ones are the following items:

* Sales contract review requires the sales department to evaluate each contract and confirm whether it can be completed on time.
* Supplier management requires the establishment of a list of approved suppliers and effective control procedures.
* Training management, with a complete training and assessment system for key personnel, and detailed records.
* Equipment management, maintenance and adjustment of equipment, a complete control system, and total records. * It is essential for measurement management and instrument measurement to have a perfect delivery system.

Communicate with the team members in time during the inspection. At the end of the meeting, summarize the supplier’s strengths and weaknesses, and listen to the supplier’s explanation. If the supplier has improvement intentions, the supplier can be required to provide a report on improvement measures for further evaluation.

After the supplier review is completed, an inquiry document is issued to the qualified supplier, which generally includes details such as drawings and specifications, samples, quantity, approximate procurement cycle, and required delivery date, and requires the supplier to complete the quotation within the specified time. After receiving the quote, carefully analyze its terms, thoroughly clarify the doubts, and need written records, including fax, e-mail, etc.

The follow-up work is quotation analysis. The quotation contains a lot of information. If possible, the supplier is required to make a cost list quotation, asking it to list material costs, labor, management expenses, etc, and clearly indicate the profit rate. Compare the quotes of different suppliers, and you will have a preliminary understanding of their rationality.

Before price negotiations, we must be fully prepared and set a reasonable target price. For small-batch products, the core of the talks is the delivery date, which requires quick response capabilities; the heart is the price for the outcomes of the assembly line and continuous production. But we must ensure that the supplier has a reasonable profit margin.

At the same time, price negotiation is a continuous process, and each supplier has a corresponding learning curve. After a period of supply, the cost will continue to drop. Achieve strategic alliances with outstanding suppliers and encourage them to propose improvement plans to maximize cost savings.

Every supplier is an expert in his field, and listening to the supplier’s advice often brings unexpected gains. There have been suppliers actively recommending alternative raw materials, such as replacing Swiss products with Korean steel. The cost savings are as high as 50%, and the performance fully meets the requirements. This is a price reduction that cannot be achieved by merely relying on negotiations. Through strategic alliances and participating in the design, suppliers can effectively help us reduce costs.

Another essential aspect is the hidden cost. The purchasing cycle, inventory, transportation, etc. are all invisible costs. It is necessary to incorporate qualified suppliers into the modern delivery system to minimize inventory and reduce the company’s total cost. It is true that when auditing suppliers, relevant departments such as procurement, development, design, production, and quality are required.

Your China Import Success Story Starts Here. Find How We Can Help You Drive More Profit.

Ready to speak with an importing expert?
Please give us a call or e-mail.


[email protected]

156+ Serving Countries Around the World

50+ China Sourcing and Shipping Masters On Staff

300+ Carrier and Forwarders Cooperating per Month

1,000+ Verified Manufacturers, Wholesalers, and Traders Dealing per Month

View 300+ Client Reviews