Vendor selection criteria: Choose the right vendor

Vendor selection is critical to decide who will walk alongside you, supporting business production and operations. Due to this weightage of responsibilities and undermining risks, selecting the vendor requires sound decision-making. You have your request for proposal ready and have received an enormous response from different vendors all over the world. Here comes the tricky vendor selection process, where you have to go through multiple profiles and proposals at once. To maximize the return on investment and not waste the efforts put forth to select the vendor, choosing the right vendor becomes fundamental.

Why is vendor selection crucial?

When you choose any run-of-the-mill supplier just because their offers are reasonable, you increase the probability of running into issues in the future. It can be related to product quality, supply limits, stock availability, risk or cybersecurity threats, overcharging, fraud, or other severe crises that will affect your business.

We cannot judge a supplier solely based on their demos, proposals, and bids. Only when you look past it will you be able to determine the lacking areas, associated risks, and supply capacity. It takes months to pull together a vendor selection process. Canceling the contract and moving to a different vendor can temporarily halt your business activities and double up the documentation.

vendor selection criteria

Things to consider for vendor selection

The list of things to look for when selecting vendors is endless. Here are some must-have qualities of vendors that can benefit you if it exists. When you are neck-deep into the process, what might surprise you is uncovering that even a well-known company lacks these qualities or a startup owns them.


Pricing is what decides the value, the worth you get for the money spent. The goal here is not to get the lowest bid possible, but to obtain the highest value for the agreed price. Don’t fall for suppliers who quote much lesser than the market price. It can underline only two things, low-quality goods, and unmentioned terms and conditions that can surge the bill. 

Don’t fail to explain your needs and goals, and get as many bids as possible. Make sure they include the cost of every line item. If not, request a fine print to know the contract in and out.

Business presence

How long they have been in the business world indirectly denotes their first-hand experience and reputation. You can check your vendor portfolio and related projects easily here. Checking out their existence duration doesn’t mean that new companies aren’t worth pursuing, as it depends on the kind of work you expect. Check their online reviews and online presence. Also, dig out negative and dissatisfied customer reviews.

Customer Service

Customer service has a crucial role when it comes to an issue with their product/service. They act as the frontrunners and pass the updates between you and the vendor during these occasions. If they don’t have a designated customer service team or aren’t in ideal working condition, think twice before making a step.

Product and service quality

Product/service quality invariably stands out amongst all as this is tangible. If it’s a product, check their samples before choosing the vendor. If it’s a service, inquire if the employees are well-trained and what training they went through. Some standards have to be met by the employees who render the service. Check if they do. Pricing is obsolete if the product quality doesn’t meet your expectations.


Businesses have begun to understand the need for modifications or improvements in their product lines, if a customer demands it. Not understanding your needs entirely and unyielding to change will only bring one customer down for them. Inspect if your vendor is flexible enough to work past their mundane strategies.


A customer vendor relationship can flourish into a more win-win partnership opportunity. Like how you prefer buying from one of your loyal, regular customers, your vendor might also show likeliness towards your products/services. Don’t leave any questions hanging in the air, when you can establish a barter relationship with your vendors or customers.

Testimonials and references

You can understand a customer’s experience with a product through the product’s testimonials. Don’t just rely on their website. Check on review sites and networking groups to know the general opinion about their products.

Businesses thrive on word of mouth. Check with your network to see if you can find any information about the vendors. Also, contact the list of references the vendor has provided.

Sustainability and financial stability

It will take months to stabilize, when one of your vendors backs out due to a lack of funds. Verify their financial sources and check their ex records too. See if they had any instances where they couldn’t pay financial liabilities on time, or had to get financial assistance. Check if they can continuously cater to your supply requirements and scale up if needed.

Delivery timings

Check how long it takes to fulfill the order from the date it is placed and how many instances per week or month you can request for consignments. Maintain delivery and shipping notes in the vendor management system. If the order has to be shipped, check shipping obligations from both sides.

Keep track of your vendor information and payments at your fingertips

Vendor selection - Best practices

Find out the suppliers

So supplier identification is your starting point. You have to draft your necessities and prerequisites first. Then, you have to make a rough budget estimation. Once you have this data, you can proceed with market research. Leverage the internet and other networks to find out prominent suppliers who will fit your budget.

Identify the performance

You must have highlighted three to five vendors. Time to check if they are good as per their claims. Check their old records and sample projects to estimate their work quality and performance. Make a table, jotting down what you expect from your vendor on one side, and on the other side, score different vendors accordingly. Performance evaluation can be an excellent way to appraise and compare vendor performance. Filter vendors out who don’t fulfill elementary-level requirements.

Request for proposal

Request a proposal with pricing plans and bids to get more information from the selected vendors. This stage can move the pointer to the next step, as you have more data to scrutinize and compare with each other. Keep in mind that your vendor must answer all of your questions at this stage. Another reminder is not to make the typical mistake of comparing apples with oranges, i.e., weighing together a big player in the market with a fresh startup.

Evaluate financial strength

As each vendor brings different things to the table, the pricing can be slightly different. It also depends on their brand value, experience in the sector, add-ons, etc. Our goal is to find out the most cost-effective vendor, a vendor who offers ultimate value and benefits for the price paid. Go back to the score table and proposals from vendors to evaluate which vendor can be cost-effective. Go over your requirements as well as the vendors’ product's key benefits, and match them with each other to find the cost-effective solution provider.

Select your supplier

The scorecard you made in the previous steps can be a major guiding factor in choosing the final vendor. You might already have derived the vendor that made it to the end. If you have two vendors and cannot decide between them, go through their proposals, and choose the one with a flexible pricing scheme. Contact other vendors who didn’t make it and communicate why they were not considered. 

6 ways to maintain good vendor relationships

Vendor account management also involves engagement, nurturing, and communication from both ends. Even if suppliers don’t care or have no time for it, imbibing the following etiquettes in your routine can strengthen your vendor relationships. Features offered by a vendor management system can also help in maintaining a good vendor relationship to a great extent.

Pick suppliers that align with your values

It’s luck by chance to come across suppliers who share similar values and business principles. When you partner with such vendors, it’s indeed going to be smooth sailing throughout, and there would be low instances where miscommunication or mishap happen. You can quickly bring each other to the same page and maintain this synchronicity throughout.


When there is a problem, raise your voice. Make sure your opinions are heard and validated. When you stay quiet during such instances, even a tiny tiff can turn into a big collapse until one of you call it quits. Communication can be in the form of emails, newsletters, virtual or physical meetings, phone calls. And when they initiate the conversation, acknowledge and respond at the earliest. Feedback or complaints, shoot them right away and help them grow.

Pay your bills on time

Earn their respect and regards by paying on or before time. When suppliers receive payment on time, they can close their accounts right away, rather than wait till the next cycle. Process invoices as soon as they come in. For seamless processing, use an vendor management system. This software will automatically read the invoice, fill in the data, and let you approve and pay. Scheduling payments is possible in supplier management software too.

Treat them as a partner, not a vendor

A partner always holds a step above the vendors, given the value they bring in. Vendors aren’t given the same priorities and considerations, as it’s treated only as a buyer-supplier relationship. Cross the bridge and start treating your vendors as partners, as they are an indispensable part of your day-to-day operations. Taking this step can secure your vendor relationships at any time.

Pay them back with your loyalty

It’s a general assumption in the business world that clients don't think twice before switching to another vendor when they hear better deals. There cannot be any other destructive way than this to knock down vendor relationships.

Are you expecting more rewards? Your vendors do too. Return the value and balance they bring you by being loyal to them. Tottering away from one to another is a big no for robust vendor management.

Bring them more clients

Be their indirect marketing partner and refer them to your circle. If they have referral or partnership systems, join them and share a word with your other vendors and clients. Appreciate their milestones and achievements on social media and share your online presence with them. After all, it’s a kind gesture that will surely win your vendors’ hearts. It works the other way too. You can also request referrals and ask them to introduce you to key people/companies they know.

Learn to say No and understand

No is a powerful word that can carry an intense message when used in business conversations. When your supplier asks for a favor, you cannot promise, politely refuse and explain why. It’s common to hear ‘No’ as a response from vendors during negotiations. If they have a solid backup on why it’s impossible to reduce costs, understand their perspective and stay professional rather than push them more. Vendor relationship management can only flourish, when you both work together and understand each other.

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