The cheapest quote is rarely the cheapest supplier. A supplier who is ₹2 a kg cheaper but delivers late twice a month, sends 3 percent rejects and files GST returns late can cost far more than the saving.
Choosing a supplier is choosing a partner your business depends on every day. It deserves the same care as hiring a senior person.
01What to look at
Price, counted fully
Compare the landed cost, which is the quoted rate plus everything it takes to get the goods to your door. Include freight, loading, packing, insurance, and the cost of credit. A supplier quoting ₹54,000 a tonne ex-works with ₹1,800 freight is dearer than one quoting ₹55,200 delivered.
Count the cost of rejects too. If 2 percent of one supplier's goods are rejected and 0.5 percent of another's, the first is effectively 1.5 percent more expensive before you even count the hassle.
Quality
- Samples first
- Test a sample, then a small order, before a large one.
- Consistency
- A good first lot is easy. Ask other buyers whether the tenth lot was as good.
- Documents
- Test certificates, batch numbers, BIS marks where they apply.
Delivery
- Lead time
- how long from order to your gate.
- Reliability
- how often they deliver on the promised date.
- Flexibility
- whether they can handle an urgent order or a change in quantity.
Credit and terms
- Credit period
- and whether it is honoured in practice.
- Minimum order quantities
- and pack sizes.
- Return policy
- for damaged or wrong goods.
Compliance
- An active GSTIN,
- checked on the GST portal.
- Regular GST filing
- Your input tax credit depends on the supplier reporting your invoices in their returns.
- Proper tax invoices
- with HSN codes and correct tax.
- Udyam registration,
- if they are a micro or small enterprise, because it affects your payment terms. See MSME payments and the 45 day rule.
The relationship
- Who you deal with,
- and whether they answer the phone when something goes wrong.
- Financial health
- A supplier in trouble may cut corners or stop supplying without notice.
- Dependence
- If you are 60 percent of their business, they will do a lot for you, but your failure is theirs too.
02Two or three suppliers for important items
For anything that would stop your business if it ran out, have at least two approved suppliers. A Morbi tile unit buying clay, glaze and packaging from one source each is one truck strike away from stopping production. Splitting purchases 70 and 30 keeps the second supplier interested and gives you a fallback.
03A simple scorecard
Review each main supplier once or twice a year. Score each on a scale of 1 to 5:
| Supplier | Price | Quality | Delivery | Credit and terms | Compliance | Total |
|---|---|---|---|---|---|---|
| Shreeji Steel, Bhavnagar | 4 | 4 | 3 | 4 | 5 | 20 |
| Om Metals, Rajkot | 5 | 3 | 2 | 3 | 4 | 17 |
| Laxmi Traders, Ahmedabad | 3 | 5 | 5 | 4 | 5 | 22 |
Base the scores on records where you can: percentage of deliveries on time, percentage rejected at the gate, number of billing mismatches. Opinions fill the gaps.
Share the result with the supplier. Good suppliers want to know where they stand, and a supplier told that late delivery is costing them business often improves.
04Records that make reviews easy
If you raise purchase orders, record goods received with rejected quantities, and match bills before paying, most of the scorecard fills itself:
- Delivery
- compare the PO delivery date with the received date.
- Quality
- rejected quantity against received quantity.
- Billing accuracy
- mismatches found when matching bills.
See purchase order basics and three-way matching.
05Adding a new supplier
Before the first order, collect:
- GSTIN and a copy of the registration
- PAN
- Udyam registration, if any
- Bank details on the supplier's letterhead, confirmed by phone
- Contact names for orders, dispatch and accounts
- Agreed payment terms and return policy, in writing
Confirming bank details by phone matters, and so does a second check when a supplier asks to change them later. Make it a rule that any change of bank details is confirmed by a call to a known contact and approved by the owner before the next payment. Messages asking you to pay to a "new account" are one of the most common frauds against Indian businesses.
06When to change a supplier
Changing a supplier has a cost: new samples, new terms, a learning period and the risk that the new one is worse. Change when the problems are persistent and the supplier does not respond after you have shared the record. One bad month is a conversation. Six bad months is a decision.
Before you stop buying, settle the account. Agree the closing balance, pending credit notes and any goods to be returned. Leaving on good terms matters in Indian trade, where suppliers and buyers in a cluster often know each other, and you may need that supplier again.
07For larger businesses
A company buying from 300 suppliers should keep an approved supplier list, review the top 30 by spend every year, and require a new supplier to be approved by someone other than the buyer who proposes them. Rate contracts for regular items and a rule of at least three quotes for large one-off purchases keep pricing honest.
In MatruOS, each supplier has a record page with documents, balance, payments and a timeline, so the history you need for a review is in one place.