I cannot grasp why many people pursue the lowest price at first glance when it comes to important purchases. The cheapest wedding photographer will not necessarily give you the most memorable pictures. The cheapest food may not actually contain the food you are looking to eat. The lowest price bid may be not be the right company to choose.
When it comes to making major buying decisions, people and companies should not make their choice in haste. Rarely does the right choice present itself quickly and easily. When speaking directly about RFPs (Requests for Proposal) the buyer needs to make the time for steps such as reference checks, requesting previous financial statements, and previous KPI (Key Performance Indicators).
Checking references is highly beneficial and worth the time. These checks help you confirm information on the supplier’s questionnaire. You will also gain greater insights into the supplier's skills, knowledge, and abilities from someone who has actually observed the supplier perform.
If it is a public company, reading any supplier’s 10K will be insightful. The SEC’s website goes over what information a 10K will provide:
+ “A description of the company’s business, including its main products and services, what subsidiaries it owns, and what markets it operates in.”
+ “Recent events, competition the company faces, regulations that apply to it, labor issues, special operating costs, or seasonal factors.”
+ “Information about the most significant risks that apply to the company or to its securities.”
+ “Companies generally list the risk factors in order of their importance.”
+ “Some risks may be true for the entire economy, some may apply only to the company’s industry sector or geographic region, and some may be unique to the company.”
+ “The company’s explanation of certain comments it has received from the SEC staff on previously filed reports that have not been resolved after an extended period of time.”
+ “Information about the company’s significant properties, such as principal plants, mines and other materially important physical properties.”
+ “Information about significant pending lawsuits or other legal proceedings, other than ordinary litigation. “
Key Performance Indicators (KPIs) are many of the top metrics to request from a supplier; such metrics include on time delivery or delivery schedule adherence, turnaround time, defective parts per million, back up rate, and inventory turnover rate. Although the accuracy and necessity of metrics are debatable, having as many KPIs as necessary for your industry will provide an overall, high level feel for how a company is performing for its customers.
American thinker Arnold Glasgow has said, “The key to everything is patience. You get the chicken by hatching the egg, not by smashing it.” American naturalist John Burroughs has said, “For anything worth having one must pay the price; and the price is always work, patience, love, self-sacrifice - no paper currency, no promises to pay, but the gold of real service.” If you are willing to give a supplier a multi-million dollar account and become partners to succeed in your industry, I implore you to perform due diligence.