Supplier Size: It Matters

Does Your Selection Criteria Include Supplier Size?
You need a supplier who will stay in business on a long-termbasis. You need a supplier whose capabilities are scalable,so your delivery, service, or quality will not suffer if yourvolume increases.
But you also need a supplier who values your business. Whenyou're unhappy with the supplier or you need specialassistance, you need your supplier to put forth extraordinaryeffort towards satisfying you.
Selecting a supplier of the "right" size - relative to yourspend with them - can meet all of these needs.
Generally, if your business represents less than 1% of asupplier's annual sales, you won't be extremely valuable tothem. So you may not get the service or attention you mayneed at critical moments.
Conversely, if your business represents over 10% of asupplier's annual sales, that supplier may be too dependent onyou. Decreases in your volume could force them to lay offportions of their workforce or even go out of business. Thatwould negatively impact your ability to satisfy yourrequirements when regular demand patterns are restored.Additionally, volume spikes could clog the supplier'soperations.
When comparing supplier proposals, note the percentage of eachsupplier's sales that would be comprised by your business.Assign one of three designations to your evaluation sheet torepresent that percentage:
<1%>10%
If the highest ranking supplier is assigned either the "<>10%" designation, reconsider how the supplier's sizemay negatively affect the performance you get out of thatsupplier during your relationship.
It may or may not change your decision. But it is somethingto be considered. Personalize this process: Think about yourown attentive and inattentive suppliers. Calculate thepercentage of their sales that is comprised by your spend.Then adjust the percentage thresholds (1% and 10%) to reflectthe correlation between supplier size and attentiveness inyour experience.