For procurement teams, selecting new suppliers carries inherent risks. Maintaining an effective preferred supplier list (PSL) requires regular evaluation and strategic updates to ensure continued business value. Whether you're replacing underperforming vendors, seeking innovative solutions, or responding to emerging market needs, procurement professionals must conduct thorough due diligence. Before establishing any new supplier partnerships, asking the right questions during the evaluation process is crucial for risk mitigation and long-term success.
1. What are your unique selling points?
Your selected suppliers should be able to tell you their unique selling points without having to think too hard. This should be part of their elevator pitch to you – what’s so great about their company, what do they do that’s different to anyone else, and what are the benefits your organisation will see as a result?
Remember that price isn't everything. Other factors are equally important when choosing a supplier - reliability and speed of delivery are also important. For example, if you buy cheaply but are constantly let down, you may very well have to start the supplier search all over again.
2. Is your company financially secure?
Before entering into any arrangement with a new supplier, it’s always worth making sure they have sufficiently strong cash flow to deliver what you want, when you need it. Any delay in supply could cause disruption to your business and frustrate your customers. A credit check will reassure you that your suppliers won't go out of business when you need them most.
3. Can we speak to your customers/reference sites?
Your suppliers should have customers who are willing to vouch for them. You could ask to see case studies or testimonials that promote the service or products they provide, or you could ask to speak to contacts at the reference sites yourself. There is no reason for them to say no to this if they have a bank of satisfied customers to choose from.
4. Do you have the capacity to meet our demand?
Finding out when the supplier was established, how many staff they have, and who they already supply to will help to give you a good idea of the quantities they are used to supplying. You will need to give them a good idea of the potential value of your orders and ask them frankly if they can meet that demand.
5. Can we grow profitably together?
If one of your requirements is to build a long-term partnership, ask this question to see if your prospective supplier is willing to build a long-term relationship with you. Find out if they have a vision for the future, with your company playing an important role. Do they see this future based on a partnership rather than just a series of deals to make money? Ultimately, the manufacturer/supplier relationship is at its best when a strategic partnership is formed.
6. Do you have service-level agreements?
Service level agreements (SLAs) are agreements or contracts with suppliers that define the service they must provide and the level of service they must deliver. An SLA also sets out responsibilities and priorities. SLAs are contractual obligations and can be used in any supplier contract where a service is being provided.
Typically, your supplier should provide an SLA that includes:
- The type of service provided
- The standards they commit to
- Delivery times
- The responsibilities of both the supplier and the customer
- Provisions for legal and regulatory compliance
- Service monitoring and reporting mechanisms
- Payment terms
- How disputes will be resolved
- Confidentiality and non-disclosure provisions
- Termination conditions
If your suppliers fail to meet what is set out in the SLA, it usually provides guidelines for compensation, normally in the form of rebates on service charges. If the SLA does not guarantee the service quality you require, it’s a good idea to look for alternative suppliers or include contingency plans to manage any issues.
7. How does your pricing compare with other organisations?
Even though selecting your suppliers should not be based wholly on cost, it’s useful to ask them how they perceive their organisation’s pricing compared with their competitors. Do they see themselves as low-end, mid-range or high-end? Getting an idea of how they position themselves will give you a good insight into not only their pricing, but also the quality of their service and products. It’s a good idea to also create a self-assessment questionnaire for any prospective suppliers to complete. This can be used to identify price as well as performance gaps, and discover how the supplier understands their operations and the market you operate in.
Procurement teams should keep their preferred suppliers list short and succinct, as it will be easier to manage and probably more cost-effective. Bear in mind that the ultimate goal is a win-win situation for the supplier and you; therefore, open and transparent communication is extremely important. Last but not least, make sure you have a backup plan – a company that you know can help you out if all else fails.
If you’re looking for a supplier in the water treatment industry, our team will be able to answer all of the questions listed above as well as any others you may have. Contact us here.
