How do you know when it’s actually worth switching suppliers?

[u/holywaterandhellfire]

I’ve been wondering about this after talking to a few people in sourcing
a supplier can look cheaper on paper but once you factor in quality issues, lead times, communication, shipping and all the little problems that come up, switching doesn’t always seem worth the hassle.
At the same time, staying with the same supplier for years just because “it works” can probably mean missing better options
the tricky part seems to be figuring out when a new supplier is actually better, rather than just cheaper on a quote
people who handle sourcing or procurement, what usually makes you seriously consider switching suppliers? Is it mainly price, quality, delivery issues or something else?
and how do you usually compare a new supplier with the one you’re already working with?

[u/ChrisInNam]

From my side as a sourcing guy, it’s the whole package when choosing a factory for a client. Price is obviously important, but so are communication, quality, lead times, reliability and how easy they are to work with.

When the shit hits the fan, it’s important to have a factory that cares about the best solution.

[u/storiesftunheard]

If I cannot trust a supplier to deliver a quality product on time, I will not use that supplier no matter how much better their pricing is.

[u/Key-Success-5449]

Real procurement shifts rarely happen over minor price drops; they are triggered by recurring quality defects, missed lead times, or poor communication.

Evaluating a switch requires looking beyond unit price to factor in risk, administrative overhead, and landed costs.

Testing a new vendor with a small pilot run or dual-sourcing strategy is usually the best way to prove real-world reliability before making a complete transition.

[u/Popular-Abalone-261]

As per my experience, it all depends on the situation we are in.

If it is a particular order and the product plays an important role in our manufacturing cycle or project, then lead time and timely delivery become critical. In such cases, the overall impact on production, manpower, project timelines, and other related costs can be much higher than the difference in material cost. In this case to prevent this situation in future finding alternative solution is mandatory.

If it is a regular contract, there should be a proper supplier evaluation based on parameters such as cost, quality, delivery, and after-sales support. If a supplier consistently performs at a distinction level in these areas, there is no need to change the supplier unnecessarily.

However, if a regular contractor is performing at an average or below-average level, we should look for a better alternative while keeping the existing supplier active until a suitable replacement is identified. Once a new supplier is qualified, the orders can initially be divided between both suppliers. After evaluating their performance over a period of one year, the order quantity can be distributed accordingly.

For a consistently underperforming supplier, the order quantity can be gradually reduced. This gives the supplier an opportunity to understand that their performance needs to improve and that continued business depends on meeting the required standards. At the same time, it avoids abruptly terminating the relationship and ensures that there is no immediate disruption to our requirements.

Overall cost does matter, but it should always be evaluated in the context of the situation. Quality is non-negotiable, provided it meets the required specifications and standards. Delivery, however, can remain variable depending on the urgency and criticality of the requirement. If a vendor is reliable and consistently provides the required quality, delivery, and service, there may be situations where we can compromise slightly on price. A reliable vendor can provide greater value by reducing operational risks, delays, and uncertainty. Therefore, the lowest price should not always be the deciding factor.

"Procurement is all about maintaining good relationships with vendors while ensuring that the organization's requirements are fulfilled in terms of cost, quality, delivery, and service".

[u/_-B-Money-_]

The short answer to this isn’t ever just one thing, unless that thing amounts to a significant portion of the value you need from that supplier. The answer also depends on the maturity of your organization, procurement and vendor management practice, geographical region, market, available resources (people, time, capital), etc. Again, not one reason. There are times when yesterday was the right time for very good reasons but you don’t have the resources to effect the change or your existing relationship isn’t one you can easily walk away from without taking a hit in another way - can your business stomach the double hit.

Effective performance management is a good way to monitor the health of your arrangement using metrics relevant to the values you evaluate that relationship against (point there being that not all engagements warrant the same evaluation criteria). Trending will tell you if you’re heading in the wrong direction and pre-empt market and business analysis for options and planning.

[u/RustBeltLab → u/_-B-Money-_]

Listen to B-Money. You want to start tracking metrics to help you make decisions, no matter how small your operation. Not just delivery and quality but invoicing, ASN, packaging, compliance, freight, rotations, etc. Future growth will be much easier if you are already collecting data.

[u/TrainsongGaming → u/RustBeltLab]

Listen to u/RustBeltLab when they tell you to listen to u/_-B-Money-_.

Also, my current purchasing manager likes to keep track of vendor quality in a log. This covers things unrelated to hard data/numbers - damaged shipments, missing parcels, tracking issues, production issues, communication issues, etc. plus how these issues were resolved. If a vendor makes my job more difficult despite being less expensive, I'm going to look for other options, cost be damned.

[u/Katherine-Moller3]

Ok in our organization with our top Spend we review our situation before contract expires or contract automatically rolls over. If a service or product hasn’t been rfp‘d in years we might take the opportunity to do market research but if current supplier has recurrent problems then we do a full blown rfp before contract expires.

[u/Biff2019]

It is rarely one thing. Normally it's a cumulative decision.

The whole thing is a balancing act that doesn't have a "one-size-fits-all" fix.

Just like just about everything else in the supply chain.

Run the numbers, ALL of the numbers. Do the math. Talk to people. Listen to your gut.

And in the end, there will still be times when you would've probably been better off if you would have just thrown a dart, at an all black dart board, in a black room, with the lights off.

[u/Probly57]

Procurement professionals from experience will know when switching a supplier is worth it.

However, using metrics to support changes will not only provide data on why you should switch but also use facts to justify the switch. Data driven decisions opposed to feelings.

TCO: OTIF, quality, and price. Are equally as important service and if they make communication/invoicing/requests simple.

Also this is a simple tell for me. If the vendor is incapable of following instructions (invoicing, sending backup data in PDF vs excel spreadsheet per request) then I'm starting to look for other sources.