Identifying suitable suppliers involves finding potential suppliers who can meet the procurement requirements and provide the necessary goods or services.
This process ensures that the organisation is working with reliable suppliers who can meet its needs efficiently and effectively.
The steps involved in identifying suppliers include conducting a market analysis to identify potential suppliers, developing requests for quotation documentation and inviting suppliers to bid, reviewing suppliers against procurement requirements and organisational protocols, making recommendations about preferred offers and obtaining relevant approvals.
In this way, the organisation can ensure it obtains the best value for money while meeting its procurement needs.
Conducting market analysis is a critical step in identifying potential suppliers who can meet the requirements of an organisation's procurement needs. It involves a systematic process of gathering information about suppliers, their capabilities, and their suitability for the procurement project. The analysis helps procurement professionals to make informed decisions when selecting suppliers and ultimately secure the best value for their organisation.
Here are the steps involved in conducting market analysis:
- Identify potential suppliers: Research potential suppliers through online directories, industry associations, trade shows, and referrals from colleagues or other organisations.
- Evaluate potential suppliers: Analyse potential suppliers by reviewing their capabilities, capacity, financial stability, and reputation. This can be done through supplier questionnaires, reference checks, and online research.
- Develop a shortlist: Use the information gathered to create a shortlist of potential suppliers who meet the procurement requirements.
What is a Request for Quotation (RFQ)?
A request for quotation (RFQ) is a document that procurement professionals use to solicit bids from potential suppliers for the provision of goods or services. It outlines the requirements of the buyer, including the specifications of the goods or services, the quantity required, and the timeline for delivery. The RFQ also sets out the terms and conditions that will govern the relationship between the buyer and the supplier.
A Request for Quotation (RFQ) document typically includes a description of the goods or services being procured, the technical specifications, the delivery or completion requirements, and any other terms and conditions that may be relevant.
It may also include a request for pricing information, including unit prices, total costs, and any applicable taxes or fees. Additionally, the RFQ document may include instructions for submitting a proposal, the deadline for submitting proposals, and any evaluation criteria that will be used to assess the proposals.
Developing an RFQ is important because it helps to ensure that all potential suppliers are provided with the same information and requirements, which makes the procurement process more transparent and fair. It also ensures that the buyer receives bids that are tailored to their specific needs and that suppliers are clear on the scope of the project and their responsibilities.
Reviewing suppliers against procurement requirements and organizational protocols is important for ensuring that the selected supplier can meet the organisation's needs and that the procurement process is fair, transparent, and compliant with regulations.
By reviewing suppliers, the procurement team can:
- evaluate the capabilities, quality, and price competitiveness of potential suppliers, as well as their reputation, experience, and compliance with legal and ethical standards. This helps to ensure that the organisation is making an informed decision when selecting a supplier, and that the procurement process is conducted in a way that is fair, impartial, and consistent with established policies and procedures.
- identify potential risks and issues that may arise during the procurement process, such as conflicts of interest, fraud, or non-compliance with procurement regulations.
- ensure that the organisation selects the best supplier and conducts the procurement process in a way that is transparent, accountable, and effective.
Example
One example of an organisation did not properly review suppliers is the case of the Volkswagen emissions scandal in 2015. Volkswagen had been using software to cheat emissions tests on their diesel engines, leading to excess emissions of harmful pollutants. It was discovered that Volkswagen had been using a supplier for their engine control units (ECUs) that did not meet their own quality and safety standards. The supplier had been selected solely based on the low cost of their components, without proper consideration of their ability to meet the necessary standards. This failure to properly review and evaluate suppliers ultimately led to significant consequences for the company and the industry as a whole.
Making recommendations about preferred offers involves evaluating the responses from suppliers and determining the best fit for the procurement needs of the organisation. Here are the steps to follow:
Analyse the responses received from the suppliers and compare them with the requirements and criteria specified in the request for quotation. It is important to make sure that all the responses are complete and meet the necessary standards.
Evaluate the suppliers' capabilities, experience, and past performance. Look for indications of their ability to meet delivery timelines, quality standards, and any additional requirements.
Review the pricing information provided by the suppliers and compare it with other quotes and the budget available. Consider the total cost of ownership, including any ongoing costs, maintenance, and support costs.
After reviewing and evaluating the supplier responses, identify the preferred supplier(s) who meet the procurement requirements and can offer the best value for money.
Once the preferred supplier(s) have been identified, seek approval from the relevant personnel, such as procurement managers, senior management, or budget holders.
When making recommendations about preferred offers, it is important to take into consideration factors such as supplier capabilities, pricing, delivery timelines, quality standards, and past performance. It is also important to consider any organisational protocols, procurement requirements, and budget constraints. The aim is to identify the supplier(s) that offer the best value for money and meet the procurement needs of the organisation.
There are various formats or communication methods that can be used to make recommendations to relevant personnel. Here are some examples:
- Written reports: A written report can be created to outline the findings of the procurement process and provide a summary of the recommended supplier(s).
- Presentations: A presentation can be made to relevant personnel, outlining the procurement process and the recommended supplier(s). This can include visual aids such as charts, graphs, and tables to help convey the information.
- Emails: An email can be sent to relevant personnel outlining the procurement process and the recommended supplier(s). This can include attachments such as the request for quotation documentation and any other relevant documents.
- Meetings: A meeting can be held with relevant personnel to discuss the procurement process and the recommended supplier(s). This can include a review of the request for quotation documentation and any other relevant documents.
It is important to choose the communication method that is most appropriate for the situation and the audience. The communication should be clear and concise, providing all the necessary information for the decision-makers to make an informed choice.
Quiz
