Supplier selection is common to all purchasers and is a critical element in the procurement ecosystem. It helps in structuring supplier bases and improving the overall efficiency of the supply chain. Supplier selection aims to ascertain the excellent supplier who proposes the best value for money of product or service. Appropriate supplier selection helps to yield higher profit and superior quality for a business.
Supplier selection depends upon several factors such as reliability, reputation, cost, service, value for money, etc. However, a strategic approach will be efficient in choosing the right supplier for the business requirements. The following reasons show the importance of supplier selection with the growing competition between businesses.
- Supply base reduction and resource deficiency are inevitable as a lot of organizations are now adopting just-in-time manufacturing. To overcome this challenge, buyers and suppliers have to maintain a long-term partnership and have greater cooperation. Eventually, supplier selection becomes one of the most critical activities for an organization as it decides the overall cost and quality of a product or service.
- Suppliers are involved in the early stages of product design. Their performance and exactitude in fulfilling business requirements will greatly impact the profitability of the purchasing company.
- If a supplier is offering high quality, it will ultimately build a reputation in front of the end customer. Whereas if a supplier offers low quality, it will cause a lot of damage to the business. That’s why the supplier selection process is of utmost importance as it can decide the fate of the business.
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