Procurement & Supplier Selection Process

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  • 0:00 Finding a Supplier
  • 0:43 Reliability
  • 1:37 Quality
  • 2:22 Value
  • 3:05 The X-Factor
  • 3:40 Lesson Summary
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Lesson Transcript
Instructor: Kevin Newton

Kevin has edited encyclopedias, taught middle and high school history, and has a master's degree in Islamic law.

Deciding from whom to purchase goods is one of the most important decisions that a business owner will make. In this lesson, we go over many basic guidelines for the procurement and supplier selection process.

Finding a Supplier

Finding a supplier for your company's needs is a problem common to all companies. Even if you are a service company, your firm will need computers, phone service, stationery, and any other number of needs. However, while consumers may just shop for the lowest price or go to a trusted name, companies need to be able to back up their choice in the budget. After all, their goal is to maximize profits - if they are going to spend more money, they should have a good reason for doing so. In this lesson, we're going to look at different reasons to choose a supplier. We'll start by looking at the three most important factors that a company should consider before hiring a supplier, but then we'll look at the X factor of smaller criteria that could sway a decision.


You might have expected me to say that the most important aspect that a firm should consider before hiring a supplier is cost. However, the most important consideration is actually reliability, meaning that the supplier is available with shipments and services when needed. After all, you can only conduct your business if you can rely on your supplier to provide you with the goods or services that you requested. Depending on the type of good or service involved, this can take different approaches. For example, a service firm may require any interruption to their IT processes be remedied as quickly as possible. Meanwhile, an auto shop may put less of an emphasis on if the wireless internet is working. However, making sure that a supplier is reliable is a crucial step. It is for this reason that many consultants recommend testing the customer service and support capabilities of a company before hiring them.


Next, you will want to make sure that whatever you're paying for meets certain quality requirements, meaning that goods and services have to meet expectations. The reason for this is simple: you don't want to throw money away on something you're going to have to replace. If you buy goods or services of low quality, then chances are, you're either going to have to replace them or have plenty of disgruntled customers.

Again, quality applies to firms of all types. A service firm may want to make sure that its internet connection is of a high enough quality to be able to handle plenty of bandwidth while large files are being moved. Meanwhile, an auto shop is going to want to make sure that the parts that it is using on its customer's vehicles are of the highest quality. If they aren't, then people are going to be coming back complaining.

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