Key Takeaway: Choosing a supplier on price alone is how businesses end up with a cheaper unit cost and a much more expensive stockout problem six months later.
What's on This Page
Criteria Beyond Price
- Lead time. How long from order to delivery, and how consistent that time actually is
- Minimum order quantity. Does it fit your actual purchasing volume, or force overbuying
- Quality/defect history. Ask for references or run a trial order before committing to volume
- Payment terms. Net 30/60 terms free up cash flow compared to upfront payment
- Communication responsiveness. A supplier that's slow to respond before you've placed an order is unlikely to improve after
A Simple Weighted Scoring Approach
Score each candidate 1-5 on the criteria above, weight the criteria by what matters most for that specific SKU (price weighted higher for low-margin commodity items, lead time weighted higher for fast-moving items), and compare the weighted totals rather than choosing on gut feel.
Never Single-Source Anything Critical
For any SKU where a delay would genuinely hurt the business, qualify a second supplier even if you don't use them regularly. See Supplier Management Guide for why this matters.
For further reading, see the Association for Supply Chain Management (ASCM).
Checklist
- Score each candidate on lead time, quality history, and price
- Confirm minimum order quantity fits your actual purchasing volume
- Check payment terms offered
- Run a trial order before committing to full volume
- Assess communication responsiveness during the evaluation process
- Qualify a backup supplier for any business-critical SKU
Common Mistakes
FAQ
Should price be the main factor in choosing a supplier?
No. Lead time, quality history, and payment terms often matter as much or more, since a cheaper unit cost from an unreliable supplier can cost more in stockouts.
How can a new supplier's quality be verified before committing to volume?
A trial order at smaller volume is a common way to check quality and reliability before scaling up the relationship.
Is it worth qualifying a second supplier even if the first is reliable?
Yes, for any SKU where a delay would genuinely hurt the business. A qualified backup, even rarely used, is real insurance.
What weight should communication responsiveness get in the decision?
More than most businesses give it. A supplier that's slow to respond before an order is placed is unlikely to improve once you're a regular customer.
Calculate This For Your Business
Related Guides in the Purchasing Academy
- Vendor Performance Tracking. evaluating suppliers after they're already onboard
- Supplier Scorecard. formalizing this scoring on an ongoing basis
- Purchase Orders Explained. another guide in the Purchasing Academy