Successful organizations understand the importance of forming relationships with the right vendors. Many businesses make the mistake of choosing a vendor based on cost alone; however, this can result in more expensive problems in the long-run. A business should choose a vendor that aligns with their operations and shares similar goals. By being careful with vendor selection from the very start, companies can avoid potentially costly hassles down the road. 

Minimizing Cost 
The negotiation process is a critical component of the vendor selection process. How well a company is able to negotiate with a vendor will ultimately decide the terms of pricing. To minimize costs, it is important for a business to develop an effective contract negotiation strategy. 

A solid negotiation strategy should consider the company’s primary priorities and what it hopes to achieve by obtaining the vendor’s goods or services. The strategy should also state the organization’s bottom line, and, if the vendor is not able to agree, the business should be ready to walk away from the deal. 

Assessing the Best Fit for Organizations 
The vendor selection process can differ depending on the size and type of organization. For this reason, businesses must document their needs in a contract so that vendors can effectively tailor their proposals. Once all requirements have been defined, a Request for Proposal (RFP) or a Request for Quotation (RFQ) is written and sent to the candidates. 

Regardless of the type of request sent, the document should contain certain information to ensure that vendors are able to meet the business’s needs. Common sections of an RFP or RFQ include submission details, organization background and overview, executive summary, assumptions, constraints, selection criteria and terms and conditions.