How to Evaluate Suppliers of Chemical Raw Materials and Ingredients
Read time: 4 minutes
When we find suppliers for what we need, how do we work out which ones are any good? Today, I’m going to look at how we work out who the ‘best’ ones are (or at least try to!!).
It’s important as the quality of raw materials directly influences product integrity, impacts customer satisfaction, and shapes our market reputation. Coupled with that, effective supplier vetting mitigates risks associated with supply chain disruptions, regulatory non-compliance, and fluctuating market dynamics.
Most businesses don’t have a robust evaluation process of chemical and ingredient suppliers, don’t keep a close enough eye on market trends or on supplier capabilities. That results in suboptimal choices that can compromise product quality, lead to supply chain inefficiencies, and inflated operational costs.
Today we will touch on:
Key factors in Supplier Evaluation
Strategies for Market Analysis
Building Long-Term Supplier Relationships
Risk Management in Supplier Selection
“The older I get the less I listen to what people say and the more I focus on what they do.” - Dale Carnegie
Naturally, some aspects of the below will and won’t be relevant for an individual business. I’m trying to be as broad brush as possible here, so hopefully, at the very least, it’s food for thought.
1. Key Factors in Supplier Evaluation: When doing a deep dive on potential suppliers, I focus on:
Quality Assurance: their quality control processes. Are they ISO certified? How frequently do they conduct quality audits? Essentially, what is their approach to maintaining product standards.
Regulatory Compliance: do they adhere to both local and international regulations. Something vital in chemicals of course, where non-compliance could lead to severe legal and financial repercussions.
Supply Chain Resilience: can they withstand and quickly recover from disruptions? What are their contingency plans for logistics, their own raw material sourcing, and production?
Sustainability Practices: what is their commitment to sustainable practice? Do they have a clear sustainability policy? How do they manage waste and emissions?
2. Strategies for Market Analysis
Market Trends: including raw material price fluctuations, emerging market demands, technological advancements, and global shifts. We can stay on top of this through discussions with a mix of suppliers, customers, even ‘competitors’, and through industry journals. It can be time consuming depending on the product and industry though.
Supplier Performance Metrics: how has their historical performance been? Look at proposed lead-times (and monitor adherence), consistency in historical COAs, and customer service records. Ask for some references and speak to those people directly.
Industry Benchmarks: how do they stack-up? Including financial stability, innovation capabilities, and market presence. What sets them apart from their competitors, why should we use their material and not someone else’s?
3. Building Long-Term Supplier Relationships (one of my favourite topics!)
Effective Communication: open and regular communication – early and often! It ensures clarity in expectations and quick resolution of any issues.
Mutual Growth Opportunities: look for suppliers interested in mutual growth. This can lead to product development, cost-saving initiatives, and exploring new markets. And remember, it’s a collaborative relationship.
Reliability Assessment: in terms of fulfilling commitments, andling crises, and maintaining consistent quality.
4. Risk Management in Supplier Selection:
Identifying Potential Risks: This includes geopolitical instability affecting supply, currency fluctuations, and changes in regulatory environments.
Mitigation Strategies: look into multiple sources, work out how much buffer stock you have and need, and stay informed about global events that could impact the supply chain.
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So, there you have it. Not exhaustive by any means, but hopefully gets you thinking about your own processes.
Ultimately, we are trying to make as informed as possible when making a decision, but we will never truly know until we pull the trigger!
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Thanks for reading, and see you next week.
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