A preferred supplier list helps organisations streamline their purchasing and build strong vendor relationships. It offers benefits for both buyers and suppliers when used effectively. In the public sector preferred supplier list is often called a framework agreement.
Definition and Purpose
A preferred supplier list (PSL) is a carefully chosen group of vendors that a company works with regularly. It includes suppliers who meet specific quality, price, and reliability standards. The main goal of a PSL is to simplify purchasing and ensure consistent quality.
Companies create these supplier lists to:
- Speed up buying decisions
- Reduce risks
- Get better deals
- Build stronger supplier relationships
They often include different types of suppliers to meet various needs. This is why a preferred supplier list can often be a great tool for SME businesses with ambitions for growth.
Benefits for Private Sector Buyers
Using a PSL can boost your company's efficiency, bottom line and make evaluating your private sector tenders easier, as you know the essentials are in place. Here are key advantages:
- Cost savings: Bulk orders and long-term deals often lead to better prices.
- Quality control: Vetted suppliers are more likely to deliver high-quality goods and services.
- Faster purchasing: You don't need to research new suppliers for every order.
- Better communication: Regular contact helps build strong working relationships.
- Reduced risk: Known suppliers are less likely to let you down or cause problems.
A well-managed PSL can also help you track spending and spot areas for improvement in your supply chain.
Implications for Suppliers / Bidders
Being on a PSL can be great for suppliers, but it comes with expectations. Here's what it means for vendors:
- More consistent business: You're likely to get repeat orders, especially if you exceed their expectations and make using your business easy and risk free.
- Closer relationships: You'll work more closely with your customers.
- Higher standards: You need to maintain quality to stay on the list.
- Competitive pressure: You might need to offer better deals to keep your spot.
Suppliers not on a PSL might find it harder to win business from those companies. But, they can still try to get on the list by showing their value and meeting the required standards. And there is always 'off contract spend'...
Criteria for Selecting Preferred Suppliers
Choosing the right suppliers is key to your business success. A strong preferred supplier list relies on careful evaluation of several important factors.
Quality Standards
Quality is a top priority when picking suppliers. Buyers will look for those with proven track records of delivering high-quality goods or services. You may be asked for samples, demos and references to test quality firsthand. Industry specific certifications or details on your quality management systems will be requested.
They will be considering your quality control processes and how you handle defects or issues. Do you offer warranties or guarantees? A commitment to quality can save businesses time and money in the long run.
Making sure your quality standards align with theirs is key. This helps ensure consistency across their supply chain and maintains their reputation with customers and wider stakeholders.
Delivery and Reliability
Timely and consistent delivery is crucial for smooth operations. A buyer managing a PSL will assess supplier's track record for on-time deliveries. Ask about your shipping methods and typical lead times.
Looking into your inventory management practices. Can you handle sudden spikes in demand? Do you have backup plans for supply chain disruptions? Think business continuity.
Do you provide real-time updates on orders? How quickly can you respond to queries or issues?
Reliability extends beyond just deliveries, of course. Can they count on you to honour agreements and meet deadlines consistently? Reliable suppliers become valuable partners. Getting a reputation for being able to deliver consistent quality can be one of the biggest sales tools a business can get!
Cost-Efficiency
While price shouldn't be the only factor, it's still important. They will be comparing quotes from different suppliers and be considering opportunities for:
- Bulk discounts
- Payment terms
- Shipping fees
- Potential for future price increases
Value for money is the key, not just the lowest price. It's important to work to their pricing schedules and be ready for post-tender negotiations.
A supplier willing to work with them on costs, as long as it is sustainable, can be a valuable long-term partner.
After-Sales Service
Good after-sales support can make a big difference. Purchasing departments will look at how suppliers handle issues or complaints. Do you offer:
- Easy returns or exchanges?
- Repair services?
- Technical support?
They will ask about you policy for defective products or late deliveries. Showing you take responsibility and can acts quickly to solve problems can make your business worth its weight in gold to a business who relies on your goods and services.
You may be asked questions to understand your willingness to adapt to their needs. Can you customise your service or products for a specific buyer? Are you open to feedback and continuous improvement, and you can evidence this from other similar contracts?
Good after-sales service builds trust and can turn a simple supplier into a true business partner.
Need support with a PSL?
Contact us todayThe Process of Establishing a Preferred Supplier List
If an organisation has a preferred supplier list, then the chances are they will have a purchasing or procurement department who will run the PSL and wider purchasing needs of a business.
Identifying Potential Suppliers
A purchasing manager will start by defining their needs and criteria for suppliers. They will look at both their current vendors and research new ones in the market, asking for recommendations from colleagues and industry contacts. This is why, as a supplier, it is important to ensure you:
- Can be found online.
- Have effective sales and marketing initiatives to build relationships.
- Attend and network within the industry.
Reaching out to these suppliers, often know as PME, they will gauge your interest in being on the list.
Assessment and Evaluation
With private sector tenders the assessment and evaluation approach may be a little 'looser' or more open, when compared to the requirements of Government tenders. However, typically, they will develop a scoring system to rate suppliers based on a specific criteria. This might include:
- Quality of products/services
- Price competitiveness
- Delivery reliability
- Customer service
- Financial health
You will likely be asked to completed detailed questionnaires, such as a PQQ or ITT. They may also arrange site visits or virtual meetings to assess your operations firsthand.
Due diligence will include reviewing your certifications, quality control processes, and industry reputation. Checking your references from the details you have provided in your bid or PSL submission. This is all part of bid management.
Shortlisting and Final Selection
The buyer or procurement team will analyse the data collected from their assessments. Rank suppliers based on their scores and how well they meet their needs. It's therefore important you see completing a preferred supplier list as more than a 'tick box' exercise and instead as a competition!
They will create a shortlist of top-performing suppliers. Invite them to submit formal proposals or bids.
Terms may be further negotiated ready for the final preferred suppliers list. You will then be informed of your status - you've got onto the list or not. Once successful they will set up contracts and onboarding processes for the chosen vendors.
How to Respond as a Supplier
Responding effectively as a supplier to get on a preferred supplier list should not be underestimated. You need to showcase your strengths, meet selection criteria, and negotiate well to secure your spot. Often the formal nature of a PSL can make suppliers see it more as a compliance exercise rather than an opportunity to sell the value of your service.
Preparing Your Proposition
Start by researching the company you're targeting. Look at their website, annual reports, and industry news. This will help you tailor your proposal to their needs and show how you share the same values.
Next, outline your unique selling points and win themes. What makes you stand out from other suppliers? Focus on your strengths and how they align with the company's goals.
Create a clear, concise pitch. Use simple language and avoid jargon. Include key info like:
- Your products or services
- Pricing structure
- Delivery times
- Quality control measures
- Customer support offerings
Meeting the Selection Criteria
Carefully review the selection criteria provided by the company. Make sure you understand each point fully. If you aren't sure about something, don't take the risk, simply ask them for clarification.
Create a checklist to ensure you meet all requirements. If you fall short in any area, develop a plan to address it. This might involve:
- Updating certifications
- Improving processes
- Enhancing your product range
Provide clear evidence for each criterion. Use data, case studies, or testimonials to back up your claims. Be honest about your capabilities. Don't overpromise. Contract KPIs will likely be created from your commitments, so don't set yourself up to fail.
If you can't meet a criterion or area of the specification, check with them and explain how you plan to address it in the future.
Presentation and Negotiation
Prepare a professional presentation. Use visuals like charts or graphs to make your points clear. Keep it brief and focused.
Practice your pitch beforehand. Be ready to answer tough questions about your business.
Listen carefully to the buyer's needs. A bid, presentation or executive summary, should always been about the buyer! Their needs and how you have the best solution. Not just about your business.
Securing a Spot on the List
Once you've made your pitch, follow up promptly. Send a thank-you note and any additional info requested.
If you're successful, review the contract carefully before signing. Make sure you understand all terms and conditions.
If you're not selected, ask for feedback. Use this to improve your offer for next time.
Stay in touch with the company even if you don't make the list. Build relationships and look for future opportunities.
Frequently Asked Questions
Preferred supplier lists involve evaluating whether your business is a good fit. It assesses effectiveness, qualifications, advantages, positioning, impact on procurement, and maintenance, for example. Let's explore some common questions about these lists.
How can I qualify to join a preferred supplier list?
To join a preferred supplier list, you need to meet the buyer's standards. This often means having a strong track record and good reputation.
You may need to go through a formal application process. This could involve submitting company info, financial data, and references. Some buyers might ask for product samples or a trial period.
Showing that you can offer competitive prices and reliable service is crucial. Being innovative or offering unique products can also help you stand out.
What are the advantages of being on a preferred supplier list?
Being on a preferred supplier list can boost your sales. You get more chances to win contracts with the buyer.
You might enjoy a smoother ordering process. This can lead to faster payments and better cash flow. Some buyers offer perks like early payment terms to preferred suppliers.
You can build a stronger relationship with the buyer. This often leads to more stable, long-term business. It can also give you insights into future needs and trends.
Can a company influence its position on a preferred supplier list?
Yes, you can influence your position on a preferred supplier list. Consistent high performance is key. Deliver quality products or services on time, every time.
Good communication with the buyer is also vital. Be responsive to their needs and concerns. Offer solutions to their problems, not just products.
Providing extra value can set you apart. This might mean offering training, support, or innovative ideas. Always look for ways to improve your service and if you collate this as evidence, it will also help you win your next tender or place on a future PSL!
How often is a preferred supplier list reviewed and updated?
Most experts suggest reviewing a preferred supplier list at least once a year. Some companies do it more often, especially in fast-changing industries. From a bidders or suppliers perspective, it is therefore very important you engage with the PSL and use it as your chance to further engage with the organisation.
