How buyers select suppliers, and what you do with it as a bidder

What is supplier selection?

Supplier selection is the step in the purchasing process where a buyer chooses, from the available suppliers, the one that best fits the need, based on criteria set in advance. It is one step in a larger process. A widely used model comes from Arjan van Weele. According to a study in the Journal of Purchasing and Supply Management, it is the model that has spread widest and been adopted most in academia, and it was already in use in 1988 in the Netherlands, Belgium and Sweden.

Van Weele describes purchasing as six steps in sequence, split into a tactical and an operational part.

1. 1SpecificationThe client sets out what it needs: function, quality, quantity, timing. This is where the requirements you will later have to meet are born.
2. 2SelectionThe buyer looks for suppliers, asks for information or proposals, and compares them against the criteria. This is where your proposal comes in.
3. 3ContractingPrice, terms and agreements are settled. A negotiation round often follows here.
4. 4OrderingThe operational part starts: the client orders within the contract.
5. 5MonitoringThe client tracks whether you deliver what was agreed: on time, at the right quality, at the agreed price.
6. 6Follow-up and evaluationThe client assesses your performance and records what went well and what did not. That verdict travels to the next selection.

Two things matter for you as a bidder. Requirements are written in the first step, before any request for proposal exists. If you are already in view then, for example through a request for information, you have more influence than if you only arrive at the proposal stage. See RFI, RFP and RFQ. And the last step feeds the first: how you perform in a running contract decides whether you have a head start at the next request.

What does the Kraljic matrix say about how a client treats you?

With the Kraljic matrix, a buyer chooses a purchasing strategy per product or service. Peter Kraljic described it in Harvard Business Review in 1983. He classifies purchases on two axes: how much they contribute to the client’s results (profit impact), and how large the risk in the supply market is (supply risk). That gives four quadrants. A publication on the knowledge platform of NEVI, the Dutch purchasing association, calls the model the dominant approach in the profession.

• High impact, low riskLeverage itemsPlenty of suppliers and a lot of money involved. The buyer uses full purchasing power: supplier selection, tough negotiation, considering substitutes. Expect a tight comparison and pressure on price.
• High impact, high riskStrategic itemsA lot of money and few alternatives. The buyer seeks a long-term relationship, analyses risks and makes contingency plans. Decisions sit high in the organisation. Trust counts for more than a few percent on price.
• Low impact, high riskBottleneck itemsLittle money, but hard to replace. The buyer mainly wants security of supply: stock, backup plans, a higher price if necessary. Reliability is your strongest argument.
• Low impact, low riskNon-critical itemsLittle money and plenty of supply. The buyer wants to standardise and order efficiently. Make it easy; a thick proposal does not help here.

Kraljic adds a question of power. Where the client is dominant and the supplier less strong, he advises a reasonably aggressive strategy (exploit). Where the supplier is strong and the client a minor player, the client must go on the defensive and look for alternatives (diversify). In between lies a balanced strategy (balance).

So look at your own quadrant first. If you supply a leverage item to this client, a good story without a sharp price rarely wins. If you supply something strategic, the client mainly wants to see it can rely on you, five years from now as well. A quadrant is not fixed either. A client that depends on a strong supplier, according to Kraljic, looks for substitute products or new suppliers. How such a shift works is not something the model itself describes, the same NEVI publication notes.

The reverse exists too. The Chartered Institute of Procurement & Supply (CIPS) describes the supplier preferencing matrix by Steele and Court (1996): how a supplier classifies its clients by the value of the business and the attractiveness of the account. Put the two side by side and you see whether you and your client find each other equally important. A strategic item at a client you treat as a side issue is a risk a good buyer will notice.

Know which quadrant you are in before you decide what your proposal needs to prove.

Which supplier selection criteria do buyers use?

A buyer almost never chooses on price alone. As early as 1991, a review in the European Journal of Operational Research mapped 74 publications on vendor selection since 1966, and a later literature review in the same journal sums up the field: suppliers are assessed on multiple criteria rather than on cost alone. Five criteria you will often meet are below.

Watch the gap between what buyers say and what they do. In a study by Verma and Pullman among purchasing managers in manufacturing, the managers rated quality as most important. But when they actually had to choose between suppliers, cost weighed most, followed by on-time delivery, and only then quality. The study is small and covers one sector, so do not draw hard conclusions from it. The lesson is still useful: do not assume quality will make up for your price on its own. Make both visible.

On risk, a buyer looks beyond your annual accounts. Kraljic mentions, for example, a supplier’s capacity utilisation (a signal of supply bottlenecks) and how unique its product is. On sustainability there is ISO 20400, a 2017 guidance standard for integrating sustainability into procurement, confirmed again by ISO in 2023.

How does a supplier scoring model work?

A scoring model makes the comparison between suppliers traceable. The buyer chooses criteria, gives each a weight, scores every supplier per criterion and adds up the weighted scores. That is one approach; the literature describes many others, including mathematical models that weigh several criteria at once. In a company you will not always get to see it.

A fictitious example: a buyer weighs quality 40%, price 30%, risk 20% and sustainability 10%. Supplier A is cheaper, supplier B scores better on quality and risk. With this weighting B can win despite a higher price. If the same buyer weighs price at 60%, A wins. The weighting decides more than you think, and if you know it, you know where your proposal makes the difference.

1. 1Ask about the criteriaHow will the client choose, and what weighs most? Many buyers tell you if you ask. A request that does not say so often shows what matters through the questions it contains.
2. 2Ask who scoresPurchasing rarely scores alone. Users, management and sometimes assistants score too, each on their own part. See the decision-making unit.
3. 3Follow the client’s orderAnswer the criteria in the order and with the headings the client uses. An evaluator who has to search scores lower.
4. 4Give evidence per criterionA score comes from what the evaluator can point to: a figure, a reference, a concrete plan. A general promise earns no points.

What is total cost of ownership?

Total cost of ownership (TCO) is a method and a philosophy that looks beyond the purchase price, at what it really costs the client to do business with a supplier. That is how Lisa Ellram described it in 1993 and 1995. In her study of eleven firms, TCO models served two purposes: choosing suppliers and evaluating suppliers.

For you as a bidder, TCO is an opportunity, especially if you are not the cheapest. Show which costs the client does not have with you: less onboarding time, fewer errors, less management, less downtime. Work it out with a fictitious example or with figures from your own work, and make clear where your assumptions are. Conversely, do not hide costs that come later. A buyer who takes TCO seriously will calculate them anyway, and a supplier who names them earns trust.

If you are not the cheapest, show what the client will not have to pay with you.

How does a buyer evaluate you during the contract?

Supplier evaluation does not stop at the award. In Van Weele’s model, monitoring and evaluation are fixed steps, and Ellram found TCO models used specifically to evaluate existing suppliers. For strategic and bottleneck items, Kraljic names vendor control explicitly as a buyer’s task. The more important you are to the client, the more closely it follows you.

Do not wait for the client to invent its own yardstick. Propose in your proposal how you will measure and report your performance: which indicators, how often, and with whom you discuss them. The client then measures you against what you promise, and at the next request you have the figures ready. How to use that head start as the incumbent supplier, and where it ends, is covered in a separate article.

What do you do with this in your proposal and conversation?

• Before the requestBe there at specificationHelp the client sharpen its need, honestly and without writing the requirements around yourself. If you think along in the first step, you understand the question better than someone who only reads the request.
• In the conversationAsk about quadrant and criteriaHow important is this to you, what happens if it goes wrong, and how will you choose? With those three questions you know what the buyer looks at.
• In the proposalWrite per criterionA summary for the decision maker, then the evidence per criterion. How to structure it is covered in how to write a business proposal.
• After the awardSupply the figures yourselfReport on the indicators you proposed, even when something disappoints. That way the client’s evaluation becomes your best reference.

A private tender, a request for proposals from a company rather than a public body, has no statutory evaluation scheme to protect you. The buyer sets the process and simply lays the proposals side by side. How to win one is covered in how to win a private tender.