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Selecting vendors on least cost basis is a costly affair!
Purchase managers in several leading companies use cost as the basis for vendor selection, as they are possibly evaluated on this parameter. As a result, companies have, over a period, developed sourcing options in several low-cost countries. These options worked for some time but broke down during the disruptive Covid period when some of these low-cost countries had supply issues.
While developing and selecting vendors, we should also consider two other important parameters, apart from cost. The first one is supply reliability during normal as well as turbulent times. It relates to both quality and timeliness of delivery. Many local vendors would possibly score higher on this parameter.
The second parameter is flexibility in supplies. Does the vendor insist on a high MOQ? Is he open to expediting or delaying deliveries at our request? Can we increase or reduce delivery quantity at a short notice? These questions gain importance when demand fluctuations are high.
In many cases, sourcing professionals keep a basket of vendors with differential capabilities on cost, reliability, and flexibility. Of course, we should make continuous improvement on all the three parameters as a part of POOGI.