Supplier Evaluation and Negotiation: A Comprehensive Guide

Posted on Aug 3, 2024 in Economy

Evaluation of Tenders

To purchase a product or a new product, the steps to evaluate and compare the information received are:

  1. Preset 1, the bids received. Eliminated by the provider that fits our main conditions.
  2. Develop a comparative table of offerings. It should reflect information on price, quality, payment, delivery time, and all the conditions offered by each of the shortlisted suppliers.
  3. Complete one form for each provider. The form should contain information identifying the company that can supply products and business conditions offered.

Selection Factors

  • Economic factors are unit price, trade discounts and rebates, transportation costs, packing, loading and unloading, and the payment period. Choose the total amount bid is less, they present the same offer will be chosen that of higher quality.
  • The quality factors priority is product quality. We analyze the samples received, the technical, operational testing. They have the same quality will be chosen to be more economical.
  • The service factors are delivery time, customer service, technical support and customer service, warranty, reputation of supplier, product acceptance in the market.

Evaluation Criteria

Is to assign a point total is divided between the 3 factors (economic, quality, and service) based on the importance that each of them. Establishing the scale or criterion.

  • Price 40
  • Payment 30
  • Quality 20
  • Delivery 10
  • —-
  • 100

The next step is to calculate the score on the basis of the scale, has won each of the shortlisted bids. The total score indicates the most suitable supplier or suppliers, though, sometimes, the offer with the highest score does not meet the needs of the company.

Select Supplier

Evaluation of tenders: indicates the provider / is most suitable. Sometimes it is enough to make decisions and get the order. Guarantor company image, financially sound and quality products. Buyer responsible or visit the supplier in your company to verify whether the guarantees are true or not and to check:

The factors of the product and the supplier are related to:

  • The technical features and ease of use.
  • The training offered by the supplier and the time required to do so.
  • The flexibility of the supplier to satisfy customer needs.
  • The trust and understanding between buyer and seller, ensuring comfort in the supply order.

The factors of the buyer are related to the type of purchase, perceived risk, and the time available, which derive directly from the organization of the buying process, i.e., the decision whether alone or jointly.

Having chosen a supplier or suppliers, we must respond to all companies who submitted its bid. Notify the final decision we have taken and the reasons that have driven us to it. A non-selected suppliers we will indicate the reasons why we have not accepted their conditions because they could make new offers. An offer may not be suitable in the present, but in the future.

1. Providers File

It is helpful to keep a file of travel providers. The purpose of the file is able to quickly obtain data from suppliers to request a quote, information, or submit orders. The conditions which must be a good file are:

  • Containing all the necessary data and rigorously updated.
  • Let the chips are sorted or classified under a system easy to find.
  • The existence of a duplicate in a safe place in case of loss or theft.

The contents of a standard model form is:

  • Data Provider ID: name or company name, VAT code, address, telephone, fax, etc.
  • Products manufactured or sold, models, sizes, colors, drive sales, consignment, etc.
  • Business Conditions: price, discounts, payment, delivery, costs, services provided, etc.
  • Comment: here is often record the result of tests performed on samples or reports received.

The data sheet is normally used to preserve data and the findings of a bid selection process. The contents of this file is:

  • Name and code of the item for which they have solicited bids and budgets.
  • Code-Name and shortlisted suppliers, in order of priority.
  • Observations on the characteristics that have excelled in studying the offers received.

Classification of the Cards

Must be properly sorted and classified. The classification systems most commonly used are:

  • In alphabetical order: use the name and address of the supplier.
  • Or alpha-numerical order, each provider is assigned a code consisting of numbers, letters, or a combination of numbers and letters.
  • The mixed system: companies get grouped by provinces, cities, districts, etc. Then apply the alphabetical or alphanumeric.

Negotiating Conditions

Wholesalers and retailers buy the products your customers demand, but the cost to enable them to obtain a reasonable profit margin. During the negotiation phase, in addition to adjust prices, also sets the discount agreements, the payment period, the conditions of transport, containers, packaging, and other services.

1. Discounts

When manufacturers sell their products at a fixed price, the trader tries to minimize the amount of the purchase by the discounts:

Trade Discounts

Is applied to the supplier’s price list, the manufacturer provides this type of discount wholesale discount is known as functional.

The discount applies to the final functional.

Discounts for Prompt Payment

Permit is issued for making payment in cash or within a specified period.

Volume Discounts or Rebates

Granting these discounts for the purchase is the largest volume or for the buyer to purchase more items for a period of time. Can be of two types:

  • Cumulative Rappels: calculated on the total amount of purchases or based on the number of units purchased during a period. Are payable at the end of the period.
  • Rappels not cumulative: the discount applies to the amount purchased by the buyer in a single order.

Other times, the supplier uses indirect quantity discounts, which are extra amounts that are delivered free of the same item or different, but salable separately.

Seasonal Discounts

Granted when the buyer purchases the products well before the selling season. Eg swimsuits, air conditioning.

The manufacturer plans to improve production, the buyer benefits at a discount and get better quality products.

Discounts

The promotional discount is a reduction in price for the buyer promotes products manufacturer, to advertise the product. It may be a number of free products or promotional grant.

2. The Term of Payment

Is the time elapsed since the purchase

is made until the debt is canceled. Is the time from which the invoice is issued until the expiration date that indicates the invoice. If the buyer does not pay the appointed day, the seller is entitled to charge interest on the days of delay.
The payment terms used are:
– Pay regular term: when the payment date coincides with the date of the invoice which is usually the date of delivery of the goods. The date of the invoice determines the payment due, but usually lasts a week for the customer to verify and give their assent.
– Payment postfechado term: when the maturity is fixed at a later date to the bill, the bill specifies that the maturity is 45 days / date / fra. It is used to encourage early purchases, and the buyer benefits from the operation by not having to pay for the merchandise until it is sold.
– Pay with extra time, is to give the buyer a few extra days before it cleared the loan term. Eg invoice for payment is stated maturity of 90 days / date / fra., 30 d / extra. The buyer has 90 days to take advantage of early payment discounts, and also has 30 days to pay the amount that the seller is applicable surcharge.
– Payment from FDM (end of period): the credit period begins at the end of the month in which they are bought, not from the date of invoice. When making multiple purchases in the same month, pay all together in the day limit the following month, taking advantage of the discount for cash payment. Similar to credit card purchases, the maturity in these cases is the 15th of the month following the purchases after day 25 are accounted for as purchases the following month.
– Payment term from RDP (receipt paper): the payment period starts the day the buyer receives the merchandise and not the date of invoice. Maturity from the date of receipt is used when the buyer is located a long distance provider. Allows the buyer sufficient time to inspect the merchandise leg and can benefit from the discount before paying the debt. Eg purchase charged May 5 with a maturity of 30 days, the buyer receives the goods on 22 June if the invoice includes the 30-day payment term RDP, since June 22 has 30 days to to make payment in cash.
– Payment under the condition COD (cóbrese or refunded) the payment takes place at the same time you receive the goods. Used in reimbursement payments from the seller or doubts the customer’s payment capacity.
– Prepayment: To get the discount, the amount of the bill is paid before the date set by the supplier. In addition to the cash discount, you receive an extra discount equivalent to the legal interest for the days that payment of the amount expected.

3.4.3-. TRANSPORT COSTS

Are caused by moving the goods from the warehouse of the seller until the point of sale or store buyer. According to the means of transport, freight or cargo are known.
– Transportation: when the journey is by road or rail (ground transportation).
– Freight: when the journey is by boat or plane (river or air transport).
Also includes other services like loading, unloading, insurance, tolls, provided by other companies.
Interested negotiate the buyer, trying to be borne by the supplier for the following reasons:
– Transport costs increase the cost of the product.
– The cost of transport is always attached to the insurance, the risks to the goods during transit.
– The supplier can get transport at lower cost and can take the same trip for delivery to various customers.
The formulas used are known as Incoterms

Incoterms
Specify the share of expenditure is borne by the buyer and seller to be payable to transport the goods from origin to destination.
– In the factory: the seller delivers the goods in his factory or warehouse. The buyer bears all costs and risks to the destination.
– Free Carrier means the seller delivers the goods to the carrier indicated by the buyer, the expenses from him.
– Free Alongside Ship: the seller makes the goods alongside the vessel without charge. From there all the costs and risks are borne by the buyer.
– Free on board means the goods are left on board the ship or in the car, since then all costs and risks are borne by the buyer.
– Cost and Freight means the seller delivers the goods at the port, station or airport of destination specified by the buyer. Until that point, the seller pays all expenses except the insurance is paid by the buyer.
– Cost, Insurance and Freight: The seller pays all costs to the port of destination, including insurance of the goods.
– Carriage paid to …: The seller pays for transportation to a specified destination city, insurance and other expenses up to the buyer’s warehouse are in charge of it.
– Carriage and Insurance paid to …: the seller pays the freight and insurance costs to the place of destination.
– Delivered at frontier: the seller delivers the goods at the border indicated, from that point the costs are borne by the buyer.
– Delivered free of rights: the seller’s responsibility extends to deliver the goods at the buyer’s warehouse or point indicated by him.

3.4.4-. CONTAINERS, PACKAGING AND OTHER SERVICES

These are elements that increase the cost of the product. The container is the primary packaging in direct contact with the goods and serves as a continent of it. The packaging is a secondary packaging which gives the product protection and presentation for commercial distribution.
Usually the packaging of the manufacturer and packaging costs are included in the price of the product. Sometimes the wholesaler has acquired media packaging and bulk goods, sell the product of his own label (white label). The buyer can negotiate these costs when the container is reusable. Other factors or services involving a cost to the consumer of the cost of installation and assembly of certain machines. These are sold to consumers with service included.