Avoid These 5 Supplier Selection Pitfalls That Cost Businesses Time and Money

Buyers generally have a good understanding of their company’s needs, however, too many assumptions and too little structure can result in mistakes when selecting suppliers. To ensure the best decisions are made, buyers need to reflect on their current decision making process. Dr. Cuneyt Altinoz has a long history of working in supply chain and offered frequent pitfalls made when selecting a supplier. Review the following list of common mistakes to make sure your company is on the right track.

Overconfidence. You neglect the collection of important information because you are too sure of your judgement. This appears two ways.

1. Buyers assume they know the wants and needs of everyone in the company.
2. Buyers assume they know how to evaluate suppliers.

These mistakes often take place out of habit and no obvious signs to break these habits. To prevent it from happening, be in constant communication with other departments within the company. Also reflect on previous decisions to see if the current criteria have been effective.

Shortcuts. You rely too heavily on rules of thumbs and readily available information.

This habit is hard to break because there are few alternatives. The most readily available information is not always the most complete. Information about suppliers can be difficult to find. To minimize the risk of this mistake, have a structured system of evaluation in place. This will ensure that critical factors are not missed.

Shooting From the Hip. This is done by ‘winging it’ and making decisions off the top of your head.

Make sure to keep record of the steps in your selection process and create and follow a systematic procedure. By not following a specified process, you may get confused by all of your current heuristics. An extra bonus of following procedure is it alerts the buyer when his or her decisions were flawed.

Not Keeping Track. Experience doesn’t teach you lessons automatically.

Many believe that experience is enough to learn important lessons in the industry, but it’s not. Constantly re-evaluate your previous decisions, not just when there is a crisis. This will help you learn what you’ve done right and what you’ve done wrong. You’ll be able to learn why successes went well and why other decisions were not as successful.

Group Failure. You assume that good choices will follow because many smart people are involved in the decision.

Moving away from more individualistic pitfalls, groups offer just as much opportunity for a mistake. Sometimes groups of really intelligent individuals don’t wind up successful. Why? Because responsibility is spread throughout the group. Many group members assume they’ll make the right decision, but this requires collaboration and the full-effort of everyone involved.

Assumptions and lack of procedure are clearly the culprits of bad decision-making here. By constantly analyzing previous decisions and updating and following procedure, the risk of a supplier selection mistake can be minimized.