Supplier selection: everything you need to know

For many organisations, suppliers are not a prerequisite, but a determining factor in success. They not only deliver products or services, but directly influence operational performance, innovativeness and strategic agility. According to Dirk Jan Leppers, it is therefore essential to approach suppliers not as implementing parties, but as partners with whom you jointly create value. "A supplier should be seen as an extension of your organisation, not as a separate link," he says.

The right suppliers make the difference in consistency, cost control and risk mitigation. That is why supplier selection is more than an operational step; it is a strategic choice that requires clear selection criteria and a structured assessment of supplier performance.

Supplier selection is the process of choosing the best suppliers based on predetermined criteria. Think of aspects such as price, delivery time, quality, sustainability or compliance in the form of certification. This is also the time to see if the supplier fits with you as an organisation and what you stand for. The selection process determines who becomes part of your supplier network and thus directly affects your organisational goals. "It is not about the cheapest party, but about the right match in all areas," says Dirk Jan.

A well-structured supplier selection process is objective, measurable and transparent. It makes it possible to ask the right questions, identify risks in time and set up cooperation in a sustainable way. You can read more about how this works in practice on our Sourcing page.

A structured step-by-step plan for supplier selection helps you make objective choices and ensures a repeatable process within your procurement strategy. By following fixed steps and supporting them with sourcing software, you increase the chance of successful collaboration and reduce procurement risks. The step-by-step plan below can be applied in any organization that wants to gain control over its supplier network.

Step 1: Determine your purchasing needs

Identify exactly what you need. Are you looking for products, services, or a combination of both? Consider volumes, frequency, technical specifications, and strategic relevance. This inventory forms the basis for the next steps in the selection process.

Step 2: Establish selection criteria

Define clear selection criteria for suppliers. Consider delivery reliability, price-quality ratio, sustainability, certifications (such as ISO or ESG), risk profile, financial stability, and technological capacity. Use both hard data and soft signals such as communication and cultural fit.

Step 3: Search for and compare suppliers

Use sourcing software or other digital tools to search for suppliers and collect information centrally. Request quotes, assess them based on your criteria, and use digital supplier assessment to compare apples with apples.

Step 4: Select the most suitable supplier(s)

Base your choice on a combination of objective scores (based on your selection criteria) and strategic considerations such as partnership potential and compliance with your ESG policy. Ensure that choices are recorded transparently, for example via the Business Spend Management platform.

Step 5: Formally record agreements

Formalize the collaboration via a contract that includes delivery conditions, performance, KPIs, and escalation procedures. Ensure that this information is stored centrally, preferably linked to your sourcing or contract management system.

Step 6: Monitor performance and evaluate periodically

Supplier selection does not stop after signing. Track performance via dashboards or reports, perform periodic evaluations, and continue to assess against your original criteria. This allows you to maintain control over costs, quality, and risks within your supplier network.

Without clear supplier selection criteria, it becomes difficult to justify decisions, both internally and externally. Selection criteria provide a uniform basis to assess suppliers in the same way and make the process reproducible.

"You need a clear framework to compare suppliers fairly and in a structured way," says Dirk Jan. Such criteria can range from delivery reliability and financial stability to sustainability and technical expertise. Defining these selection criteria in advance makes it easier to add new suppliers as well as review existing relationships periodically.

Effective supplier selection requires more than a list of requirements or a bid comparison. It's about finding the right match, and for that you need reliable information. "When making an informed supplier choice, you don't just look at figures, but also at the quality of the cooperation," says Dirk Jan.

Hard data such as delivery reliability, financial stability and certifications form the basis of objective assessment. But soft signals such as communication, flexibility and culture fit are at least as important in establishing supplier selection criteria. Combining both types of data creates a more complete picture that leads to better choices and sustainable cooperation.

Unreliable suppliers can have major consequences for your supply chain. Think delays, reputational damage or legal issues. "If you only discover that a supplier was not compliant when an incident occurs, you are too late," warns Dirk Jan.

A well-designed supplier selection process acts as a first filter in risk management. By testing suppliers in advance on their stability, legal structure and ESG criteria, you structurally reduce risks. Moreover, a digital approach, in which you record and test the requirements and agreements from the start, also enables you to intervene in time later in the process if performance deviates from these agreements.

Wondering how SSC Ons set up their supplier selection and contract management with a professional Source-to-Pay approach? Read the customer case and discover their approach.

Sustainability is playing an increasing role within supplier selection. Organisations are being scrutinised for their full chain responsibility, including their supplier choices. "Many organisations underestimate how visible their suppliers are to customers, investors and regulators," says Dirk Jan.

Supplier selection criteria therefore increasingly include elements such as energy consumption, human rights policies, certifications and social impact. By including these ESG factors directly in the selection process, you not only increase compliance, but also strengthen your reputation as a responsible organisation.

With ISPnext's Business Spend Management platform, you digitise the entire selection process from request to contract. Suppliers can be assessed on fixed criteria, all supplier information can be compared digitally and you work from one central interface. "You not only get an overview, you also avoid subjective choices," states Dirk Jan.

In addition, procurement teams can link suppliers to contracts, monitor performance and integrate with processes such as invoice processing. This ensures consistency, speed and fewer errors in the overall process.

Those who organise supplier selection well build long-term relationships, better results and lower risks. It is a strategic tool that allows you to make a difference as an organisation. "The difference is not in the software, but in how you smartly design the process so that they lead to the right insights," says Dirk Jan.

Combining selection criteria with digital workflows creates overview, speed and certainty. Supplier selection (Sourcing) thus becomes not only more efficient, but also more valuable for the entire organisation. Finance and procurement benefit from one central platform that also supports compliance.

Want to know how your organisation deploys data-driven supplier selection? Or how to set up and automate supplier selection criteria? Then take a look at our Sourcing solution or contact us for a no-obligation demo.