Identification of the Right Source

Before ascertaining the need for supplier development, the following questions at the macro-level need to be addressed :

1. Which are the present single source items being procured -nationally or internationally ? 
2. What alternatives are there ? 
3.  How can they be developed to the required standards ? 
4. How do we best hedge our risks by capitalizing on our strengths in minimizing the risks arising out of the monopoly supply situation ? 
5. Have we really searched and exhausted all sources of supply - both nationally and internationally ? 
6. What are the major elements of the cost components of item ? 
7. What are the major anticipated supply cost trends of key components in the next few years of these vendors ? 
8. How will these vendors be affected in these few years ? 
9. Will the entry/exit of the major suppliers to these vendors affect the pricing structure in the market ? 
10. If yes, how will this affect the manufacturing cost ? 

While identifying the right source at the micro-level, the following points need to be addressed :

1. Past record of the supplier with the company,
2. Financial status of the supplier - balance sheets or bank certificates can be used for credit  worthiness,
3. Plant capacity, growth plans need to be ascertained as satisfactory proof of size and the volume of orders that the vendor can handle,
4. Delivery records should indicate minimum lead time and delays,
5. Supplier's preparedness to accept the buyer's specifications and other contract conditions on warranted and replacements,
6. Ability to respond to unusual and emergency requests from buyers and the decision making framework in this regard,
7. The technical, financial and production capacity in terms of capability of its personnels,
8. Break even points in the plants manufacturing capacities,
9. Effectiveness of the supplier's organisation and management inching the ownership stam and operational reliability of its machinery,
10. The industrial relativistic of the with its unions, its past strikes or other work stoppage or slowdown problems and the ability of the firm to cope with them in the past, and
11. Inattentiveness of the company and morale of staff. Other criterion may also be used.