Exercising Due Diligence When Choosing a Supplier
The coverage of any due diligence process will be affected by the cost of the services for procurement, the value of the services to your business, and the risks of the absence or poor performance of such services. However, whatever the size of your business, there are some key steps you need to follow.
Identify your needs and preferences. You have to be clear from the start what you are would like to achieve. This will help you see what specifically you need from your supplier, not just as far as their service offering is concerned but also their values and how they treat their customers.
Studying the Market
Resources: 10 Mistakes that Most People Make
When you know what you need and want from your supplier, create a shortlist of candidates by way of a “Request for Information” document (RFI). This quickly outlines the goods and/or services necessary and requests information as to suppliers’ abilities and competencies.
A Quick Rundown of Resources
Investigating Probable Suppliers
Here’s a checklist that will enable you to evaluate potential suppliers’ abilities and fit with your organisation:
Business Identity- Know who you’re dealing with, whether they are a legitimate business and if the person you are negotiating has the authority to commit the supplier.
Financial Background- If a supplier has dealt with an operating loss, or a substantial loss of revenue in the past few years, this could indicate a deeper problem.
Delivery of Goods/Services – Does the supplier’s suggested method of satisfying your requirements fit with your established practices?
How do they plan to handle any challenges or difficulties?
Are they capable of delivering the promised services for the quoted price? How do they compare with others on this particular aspect?
On this account, how do they compare with the others?
Quality – Review the company’s credentials and/or standards’ accreditations.
Cost – Compare different suppliers’ quotes. Take note however that best value for money isn’t necessarily the cheapest price.
Business age – Longevity may increase your confidence but a younger company can be innovative in approach and attitude.
Track record – Request for feedback from other customers, some of whom you may even know.
Meet with your prospective supplier – Not only is this a good way to see if you can work together but it also offers you a chance to see their workplace, examine samples of service deliverables or witness demonstrations on performing the services.
Risk Assessment and Management
Once you have appointed your supplier, have a risk register describing relevant risks and how to manage them. This can be referred to in the course of the relationship.
Selecting Data Processors
Sharing data with your supplier may be necessary, but do make sure they are fully aware of current data protection regulations and will actually comply.