Common Challenges in Supplier Selection

2024-09-05

When a company evaluates and selects suppliers within its supply chain, the process is much like how an ordinary consumer chooses products. At first glance, it may seem that selecting the right supplier is as simple as checking their price list. However, in reality, the supplier selection process is far more complex, and making the wrong choice can negatively impact the organization. Therefore, the selection of suppliers is crucial for a company.

Common Issues Faced During Supplier Selection

When procurement teams focus solely on product quality and price without conducting a rational analysis, they often encounter the following issues:


1. Excessive and Dispersed Suppliers: Managing too many suppliers, spread across different areas, can weaken the companys bargaining power, ultimately leading to higher procurement costs.

2. Limited and Narrow Selection Criteria: Relying on overly simplistic selection criteria can result in high procurement costs during later operations, hindering the companys long-term strategic development.

3. Inadequate Supplier Assessment: Failing to thoroughly assess suppliers can lead to a lack of understanding of their financial status, internal organization and management, workforce, and supply capabilities.

4. Incomplete Supplier Performance Evaluation: Inadequate performance assessments can affect the potential for long-term collaboration with suppliers.

The Role of Supplier Management Systems

Modern enterprises can simplify the process of selecting qualified suppliers by implementing a professional supplier management system. For example, using the 8Manage SRM (Supplier Relationship Management) system allows companies to optimize the selection and management of suppliers through public recruitment, pre-selection, delivery quality scoring, and qualification reviews.

Public Recruitment and Pre-selection: Screening the Right Suppliers

To maintain competitive pricing, companies regularly recruit new suppliers. The 8Manage SRM system supports the public recruitment of suppliers, allowing enterprises to set up pre-selection questionnaires and publish recruitment announcements. Suppliers can register and fill out the pre-selection questionnaire, and the system automatically calculates each applicants total score based on preset criteria to determine if they pass the preliminary screening.


Segmenting Suppliers to Identify the Best

The 8Manage SRM system provides real-time 360° supplier information management, offering a comprehensive view of suppliers, including basic information, organizational structure, legal status, financials, and qualifications. The system supports detailed supplier segmentation by rating, region, industry, service/product category, and more. This detailed classification, along with complete historical transaction records, enhances business decision-making and the ability to identify and collaborate with the best suppliers quickly.

Quality Scoring and Qualification Levels

Automatically collecting objective performance data is crucial for a comprehensive and scientific evaluation of suppliers. The 8Manage SRM system not only tracks this data in real time but also incorporates subjective performance evaluations from users who directly receive the suppliers products and services, providing a more flexible and comprehensive assessment.

Furthermore, the system manages supplier qualification reviews and levels, allowing users to view approval rules and processes at any time. Suppliers must pass the qualification review to be deemed qualified. Additionally, the system includes a blacklist management feature, enabling authorized users to blacklist unsatisfactory suppliers.

Conclusion

Traditional supplier selection methods are no longer sufficient to meet the evolving needs of enterprises. The ability to select the right suppliers directly impacts the efficiency of the procurement organization and, consequently, the companys competitive advantage. This plays a crucial role in the long-term development of the enterprise. By adopting scientific methods and utilizing supplier management systems, companies can effectively standardize supplier management and select the best suppliers.