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How can organization select a supplier?

As a Procurement Analyst in a large company we will work on a proposal to the chief Procurement Officer identifying the best supplier to outsource, we have 3 choices to pick from. Since the company operates in a mature market, quality and time are critical to the customer.

Supplier
Price
Quality
Delivery
Others
A
90
90
95
Overseas supplier
(transport lead time 3 weeks)
B
105
100
100
Supplier facing financial issues
C
85
85
95
Proximity supplier
(transport lead time 3 hours)

Let us first consider supplier A, which is an overseas supplier and it will take 3 weeks to transport their product, since time and quality are critical for the mature market the company operates in, so this is a huge red flag. Otherwise, the quoted price, quality, and delivery are all above 90.
Supplier B has a different problem. It is going through financial issues. Since our company wants a 3-year contract it will be risky to sign a long contract with a supplier that does not have financial stability. Although the quality and delivery are per company’s expectation the financial stability is a red flag. Moreover, the company has great delivery and quality records but the quoted price is over what our company’s target price. The fundamental way to make sure that the supplier meets the requirement is to make sure the supplier meets price requirement. (Webb,2017)

Supplier C, on the other hand, can transport within 3 hours but does not have a great price or quality per the company’s liking. The price is fairly lower than our target price. The quality is poorest among all 3 but delivery is almost like Supplier A.

I would like to select supplier C, the quality is worst among all options but the transport time is the fastest among all three, which is 3 hrs. And there is no uncertainty around their financial situation, so a 3-year long contract should work out fine. In a matured market quality and price would be a matter of concern, but a quick transport time can really help for 3 years to gain market share and boost sales. And it is an established fact that one important factor in profitability is market share (HBR, n.d).

Now, if my company’s selection criteria change from quality and time to quality and price, I will seriously consider Supplier A. Supplier B has financial stress, so a 3 years contract with a financially ailing vendor will cause uncertainties. Supplier B’s price is another matter of concern, so we cannot deal with them. Supplier C has poor quality among all 3 suppliers. The delivery is exactly the same ass supplier A. Our market is still sensitive to quality and I would not compromise with it when our company is fine with longer transport time. That makes the supplier A the preferred supplier, although it is an overseas supplier and they will take 3 weeks to transport. The quality is better and the delivery is the same as supplier C.
References:

Webb, J (May 2017). How To Measure Supplier Performance: 3 Basic Metrics To Gauge Success. Retrieved from https://www.forbes.com/sites/jwebb/2017/05/30/how-to-measure-supplier-performance-3-basic-metrics-to-gauge-success/#970e1b56660c


Retrieved on 12/12/2018. Retrieved from https://hbr.org/1975/01/market-share-a-key-to-profitability

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