Top 10 Factors to Consider When Selecting a Supplier

Selecting the right supplier is no longer just a purchasing decision – it is a strategic risk and growth decision. The supplier you choose will affect:

• your product quality and returns rate,

• your landed cost and working capital,

• your brand reputation on ESG and compliance, and

• your ability to scale without constant firefighting.

Professional bodies such as the Chartered Institute of Procurement & Supply (CIPS) emphasise that effective supplier selection is one of the most critical levers in building a resilient, value-creating supply chain.

Below you will find the top 10 factors to consider when selecting a supplier, written for B2B buyers who manage complex, multi-country sourcing programs rather than single one-off orders.

Why supplier selection is now a strategic decision

Global supply chains are under increasing pressure from:

• Regulation – the EU’s Corporate Sustainability Due Diligence Directive requires large companies to identify and address human-rights and environmental impacts across their entire value chain.

• ESG expectations – investors and customers expect traceability, fair labour and reduced environmental footprint.

• Volatility and disruption – pandemics, geopolitics, raw-material spikes and logistics bottlenecks.

That means your supplier is not just a source of product – they are a co-owner of your brand risk. A structured, criteria-based approach to supplier selection is essential.

Top 10 factors to consider when selecting a supplier

1. Product quality and quality management system

Quality is always factor number one. It is not enough that samples look good; you need evidence that the factory can repeat that quality at scale.

Key questions:

• Do they operate a formal quality management system such as ISO 9001?

• How do they control incoming materials, in-process checks and final inspections?

• Can they share recent third-party inspection reports or lab test results?

ISO 9001 is the world’s leading quality management standard and is used by hundreds of thousands of organisations to ensure consistent products and services.

For high-risk categories (e.g. children’s products, electricals, food-contact items), factor in product-specific standards and certification requirements as well.

2. Reliability and delivery performance

Even the best quality is worthless if the goods do not arrive when your business needs them. Supplier reliability has a direct impact on:

• service levels,

• stockouts and markdowns,

• express freight and firefighting costs.

You should ask for:

• On-time delivery rate (OTD) for the past 12–24 months,

• average and worst-case lead times,

• how they communicate and manage delays.

Structured guides on the supplier selection process highlight delivery performance as one of the core criteria, alongside cost and quality.

3. Total cost of ownership, not just unit price

Lowest FOB price rarely equals lowest cost. A robust supplier selection process looks at total cost of ownership (TCO), which includes:

• unit price,

• packaging and logistics,

• import duties and compliance costs,

• rework and return rates,

• administrative overhead,

• impact on working capital (payment terms and inventory levels).

Suppliers with slightly higher unit prices but much better quality and reliability often deliver lower TCO and higher margin over the life of the program.

4. Financial stability and long-term viability

You want suppliers who will still be there in five years. A financially weak supplier may:

• delay production because they cannot buy raw material,

• cut corners on quality,

• collapse mid-season and leave you without stock.

Professional procurement guidance recommends checking financial stability via credit ratings, audited statements and banking references before committing strategic volume.

For truly critical suppliers, you might implement periodic financial health reviews as part of ongoing supplier evaluation.

5. Capacity, scalability and operational capability

Great sample rooms are common; factories that scale reliably are rare.

Points to evaluate:

• current capacity vs. your expected volumes,

• flexibility to ramp up for promotions or openings,

• bottlenecks (e.g. finishing lines, packing, specific machines),

• contingency plans for peak seasons or disruptions.

Industry guides on supplier selection emphasise verifying a supplier’s operational and technical capability, not just theoretical capacity, before relying on them as a core partner.

6. Compliance, certifications and ESG performance

Regulators, investors and customers are pushing companies to ensure that their suppliers respect human rights, labour standards and environmental rules.

In the EU, the new Corporate Sustainability Due Diligence Directive will require large companies to identify, prevent and address adverse impacts across their supply chains.

When assessing suppliers, consider:

• Do they hold relevant social and environmental certifications? (e.g. SA8000, ISO 14001, FSC, BSCI/SMETA audits)

• Do they understand and support your ESG reporting needs?

• Can they trace key raw materials to compliant sources?

Training resources such as CIPS’ module on ethical and responsible sourcing underline that ESG must now be embedded in sourcing strategies and supplier selection criteria.

7. Technical expertise and innovation

For many categories, you are not just buying capacity – you are buying know-how. Strong suppliers:

• propose better constructions or materials,

• optimise designs for manufacturability,

• help you meet new safety or performance standards,

• contribute to cost-engineering without killing product value.

Leading procurement commentary on supplier selection highlights the importance of capabilities and innovation alongside cost and quality.

In fast-moving markets, suppliers with solid R&D and engineering teams can become co-developers, not just vendors.

8. Communication, collaboration and cultural fit

Data and certificates are essential, but how a supplier works with you day-to-day often decides whether the partnership succeeds.

Look for:

• clear, proactive communication,

• openness about problems (instead of last-minute surprises),

• ability to work cross-functionally with your design, QA and logistics teams,

• willingness to share information and build joint roadmaps.

McKinsey research shows that companies that regularly collaborate with suppliers outperform peers in growth, cost and profitability.

Ask yourself: “Would I trust this team in a crisis?” If the answer is no during selection, it will be worse once you are locked into a big order.

9. Risk profile, location and supply chain resilience

Supplier selection should always include a risk lens, not just a cost lens. Consider:

• geographic risk (political, climate, logistics),

• concentration risk (how dependent you are on one factory or one region),

• cyber, IP and data-security risks,

• exposure to changing legislation in different markets (e.g. EU due diligence, national supply chain laws).

KPMG and other advisors recommend mapping your supply base against current and upcoming ESG and supply-chain regulations to avoid being caught unprepared.

For strategic categories, you may want dual-sourcing or multi-country sourcing by design.

10. Service, continuous improvement and relationship potential

Finally, think beyond the first PO. The best suppliers help you:

• solve problems quickly when something goes wrong,

• jointly improve quality and efficiency over time,

• share market and technology insights,

• reduce complexity and costs via standardisation or consolidation.

Procurement literature stresses the value of managing suppliers as long-term partners, with regular performance reviews, feedback and recognition rather than pure transactional interactions.

Suppliers who embrace continuous improvement will create outsized value over the life of your relationship compared with those who only react when pushed.

Turning the top 10 factors into a practical supplier scorecard

To apply these factors consistently, many procurement teams use a weighted scorecard. Below is a simple example you can adapt:

Factor	Typical Weight	What to Check	Red Flags
Quality & QMS	20%	ISO 9001 or equivalent QMS, defect rates, lab reports	No formal QMS, inconsistent inspection data
Delivery & Reliability	15%	OTD %, lead-time consistency, logistics capability	Frequent delays, vague explanations, no KPIs
Total Cost of Ownership	15%	Landed cost breakdown, rework/return history	Very low price with poor TCO transparency
Financial Stability	10%	Credit checks, financial statements, years in business	Negative credit info, significant recent losses
Capacity & Scalability	10%	Installed capacity, peak-season plan, automation level	Overloaded lines, unclear capacity data
Compliance & ESG	10%	Social/environmental audits, traceability, policies	No audits, unwilling to discuss ESG topics
Technical Expertise & Innovation	8%	Engineering team, design input, certifications	Only “build to print”, no improvement ideas
Communication & Cultural Fit	5%	Response time, clarity, project management skills	Slow replies, defensive behaviour, no transparency
Risk & Location	4%	Country risk, backup facilities, business continuity plans	High-risk region with no mitigation
Service & Improvement Mindset	3%	References, continuous-improvement track record	Purely transactional attitude, no KPI reviews

You can then score each supplier (e.g. 1–5) on every factor and multiply by the weight to get a comparable total score.

FAQ: Supplier selection for B2B buyers

How many factors should I use when selecting a supplier?

Most organisations work with 8–12 core criteria, grouped under quality, cost, risk, ESG and relationship. CIPS and other professional bodies recommend focusing on the criteria that directly support your business objectives rather than very long checklists.

How do I balance price vs. quality when comparing suppliers?

Start from quality and risk thresholds: any supplier who cannot meet your minimum quality, safety and compliance requirements should be excluded, regardless of price. For the remaining candidates, compare total cost of ownership instead of unit price, factoring in logistics, returns, rework, payment terms and internal overhead.

How can I check a supplier’s ESG performance and compliance?

You can:

• request existing audit reports (BSCI/SMETA, SA8000, ISO 14001, FSC etc.),

• ask targeted questions about labour, environmental and ethics policies,

• use third-party ESG and due-diligence services for higher-risk regions or categories.

The EU’s due-diligence rules make it increasingly important to have documented processes for identifying and managing supply-chain risks, not just informal checks.

How often should supplier performance be reviewed?

Best practice is to:

• review critical and strategic suppliers quarterly,

• review standard suppliers at least annually,

• track key KPIs continuously (OTD, defect rate, complaints, CAPAs).

CIPS guidance on supplier evaluation stresses that evaluation is a continuous process, not a one-off event at onboarding.

Why is collaboration with suppliers such a big theme in recent years?

Studies from firms like McKinsey show that companies who actively collaborate with suppliers – on cost-reduction, innovation and risk – achieve higher growth, lower operating costs and better profitability than those who only negotiate on price.

That is why modern supplier selection looks not just at “Can they produce?” but also “Can we build a partnership that unlocks value over time?”

By embedding these top 10 factors into your RFQs, factory audits and scorecards, you move supplier selection from gut feel to structured, data-driven decision-making – and build a supply base that is resilient, compliant and profitable for the long term.