Performing Due Diligence on a Potential 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, no matter the size of your business, there are some basic steps you must follow.
Know your needs and preferences. You need to be clear from the get-go what you want to achieve. This will help to determine what in particular you need from your supplier, not simply when it comes to their service offering but their values and attitude towards their customers too.
Looking into the Market
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Knowing what you want and need from a supplier, you can draw up a shortlist of prospects through a “Request for Information” document (RFI). This concisely outlines the necessary goods and/or services and asks for information related to the capabilities and competencies of suppliers.
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Researching Prospective Suppliers
Here’s a checklist that will enable you to evaluate potential suppliers’ abilities and fit with your organisation:
Business Identity- Know the company you’re dealing with: is it legitimate and is the person you are negotiating with authorized to bind the supplier?
Financial Background- A supplier with an operating loss, or considerable loss of revenue over the last few years may have underlying problems.
Delivery of Goods/Services – Does the supplier’s suggested method of satisfying your requirements fit with your established practices?
How do they intend to contain any difficulties?
Will they be able to deliver the promised services for the price they have quoted you? On account of this, how do they compare with the rest?
Quality – Examine the credentials and/or standards’ accreditations of the supplier .
Cost – Compare several quotes from different supplier. However, keep in mind that best value for money doesn’t automatically mean the cheapest price.
Business age – Longevity can boost your confidence but a newer company may be more innovative in terms of approach and attitude.
Track record – Ask for comments or feedback from other clients (you probably know some).
Talk to your prospective supplier – This is not just an effective way of knowing if you can work together but also gives you a glimpse of their premises and samples of service deliverables or witness demonstrations on the way the services are going to be performed.
Risk Assessment and Management
Once you have appointed your supplier, have a risk register describing relevant risks and how to manage them. You can refer to this throughout the course of the business relationship.
Working with Data Processors
You may have to share data with your supplier, but make sure they are fully aware of and compliant with existing data protection regulations.