The vendor selection process can be a very complicated and emotional undertaking if you don’t know how to approach it from the very start. Here are five steps to help you select the right vendor for your business. This guide will show you how to analyze your business requirements, search for prospective vendors, lead the team in selecting the winning vendor and provide you with insight on contract negotiations and avoiding negotiation mistakes.
1. Analyze the Business RequirementsBefore you begin to gather data or perform interviews, assemble a team of people who have a vested interest in this particular vendor selection process. The first task that the vendor selection team needs accomplish is to define, in writing, the product, material or service that you are searching for a vendor. Next define the technical and business requirements. Also, define the vendor requirements. Finally, publish your document to the areas relevant to this vendor selection process and seek their input.
Have the team analyze the comments and create a final document. In summary:1.Assemble an Evaluation Team2.Define the Product, Material or Service3.Define the Technical and Business Requirements4.Define the Vendor Requirements5.Publish a Requirements Document for Approval•Read more about How to Analyze Business Requirements2.
Vendor SearchNow that you have agreement on the business and vendor requirements, the team now must start to search for possible vendors that will be able to deliver the material, product or service. The larger the scope of the vendor selection process the more vendors you should put on the table. Of course, not all vendors will meet your minimum requirements and the team will have to decide which vendors you will seek more information from. Next write a Request for Information (RFI) and send it to the selected vendors. Finally, evaluate their responses and select a small number of vendors that will make the “Short List” and move on to the next round.
In summary:1.Compile a List of Possible Vendors2.Select Vendors to Request More Information From3.Write a Request for Information (RFI)4.Evaluate Responses and Create a “Short List” of Vendors•Read more about How to Accomplish a Vendor Search3. Request for Proposal (RFP) and Request for Quotation (RFQ)The business requirements are defined and you have a short list of vendors that you want to evaluate.
It is now time to write a Request for Proposal or Request for Quotation. Which ever format you decide, your RFP or RFQ should contain the following sections:1.Submission Details2.Introduction and Executive Summary3.Business Overview ; Background4.
Detailed Specifications5.Assumptions ; Constraints6.Terms and Conditions7.Selection Criteria•Read more about How to Write a Request for Proposal (RFP) or a Request for Quotation (RFQ)4. Proposal Evaluation and Vendor SelectionThe main objective of this phase is to minimize human emotion and political positioning in order to arrive at a decision that is in the best interest of the company. Be thorough in your investigation, seek input from all stakeholders and use the following methodology to lead the team to a unified vendor selection decision: 1.Preliminary Review of All Vendor Proposals2.
Record Business Requirements and Vendor Requirements3.Assign Importance Value for Each Requirement4.Assign a Performance Value for Each Requirement5.Calculate a Total Performance Score6.Select a the Winning Vendor•Read more about How to Evaluate Proposals and Select a Vendor5.
Contract Negotiation StrategiesThe final stage in the vendor selection process is developing a contract negotiation strategy. Remember, you want to “partner” with your vendor and not “take them to the cleaners.” Review your objectives for your contract negotiation and plan for the negotiations be covering the following items:1.List Rank Your Priorities Along With Alternatives2.Know the Difference Between What You Need and What You Want 3.
Know Your Bottom Line So You Know When to Walk Away4.Define Any Time Constraints and Benchmarks5.Assess Potential Liabilities and Risks6.Confidentiality, non-compete, dispute resolution, changes in requirements7.Do the Same for Your Vendor (i.e. Walk a Mile in Their Shoes)•Read more about How to Plan Contract Negotiation Strategies6. Contract Negotiation Mistakes