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Small and Medium Enterprises (SME’s) play a pivotal role in any nations’ economy since SMEs constitute over 75% -80% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for major share of industrial production and exports and thus enabling to achieve the objective of inclusive growth. And this is so true for a dynamic economy and country like India where there are estimated 30 million MSME’s spread everywhere and anywhere across the length and breadth of the country and which accounts for 45 per cent of India’s manufacturing, 40 per cent of industrial output and exports, 17 per cent of the Gross Domestic Product (GDP), provides employment to 60 million people and has a product range of 8,000.

The after effects of the Global Financial Crisis are still visible in many economies around the world, which also have shook their foundation and some of them are still struggling to recoil back! In such times it is very likely that most of the worst effected in this are the Small and Medium Enterprises, some of them who have got completely wiped off while others still trying to figure out what exactly happened!!!.  But such uncertainities can never be predicted and hence it becomes very imperative for SME’s to lay a very robust foundation which can withstand the storms of times. Building a robust structure also calls for incorporating various practices and systems within the organisation and close monitoring & relooking periodically at them becomes very imperative.

One such system which SME’s should consider is analysing and selecting their Vendors – both External as well as Internal.  Below outlined are the Top 10 criterias which SME’s should consider while selecting a right vendor/s.

1.  Credibility and Reliability – Carry out a thorough reference check. Keeping in mind the Quality of Service/products delivered understand the credibility aspect. Call up or meet up with their existing client/s and check about the credibility of the vendor.

2.  Level of Engagement Required- Evaluate the level of engagement that you need from the vendor and the time frame (long term or Short term)

3. Companys Requirements - Evaluate the most critical aspects which would require the most attention which would require vendor services.

4. Technical Experties - Does the vendor has adequate inhouse technical expertise and knowledge about your requirement. Many times Vendors tend to source such aspects from other vendors and provide you the service which leads to many issues.

5. Adequate Expert Manpower and Resources – This is very crucial as many a times during crisis this is the most important part for your business to be up and running in the shortest possible time.

6. Quality of Service - Is the service provided by the vendor prompt and of high standards in the market.

7.  Level of Engagement by the Vendor – Evaluate the proactiveness shown by the Vendor. Has the Vendor been able to understand your requirements. Is he able to explain the nitti-gritties as well as the terms and conditions, flexibility in terms of devising a customised package rather than pushing the products/services.

8.  Price Tag/ Cost Factor - Has the Vendor been resonable enough to price tag it correctly. Many vendors overcharge on their products/services due t various reasons. Its the Value versus the Spend ratio which is important and not the price per say.

9. Return On Investment (ROI) – Will the vendor be able to give the Return on Investment in terms of various above factors such as Quality, reliability, Technical expertise, Price and keeping it in mind the long term commitment between both parties to create a Win-Win sictation.

10. Service Level Agreements (SLA) - One of the most important part is the SLA’s which many vendors fail to keep up with. SLA’s should not just be on mere paper but also effective implementation at all time is a must.

Also another most important factor is after sales service which most of the vendors and service providers fail to keep up with tresulting in a disasterous situation leading to loss of time and revenue. Many a times the ability to sustain such services by the SME busness itself plays a major role. Many SME’s tend to select nice, fancy, high price tagged services only to find later that they have been dealing with a white elephant which they cannot afford to maintain.

The best way to select a Vendor/s is keeping in mind some / all of the criterias mentioned above (as well as some other criterias as per your requirement) and then putting up a long list of around 5 to 10 vendors fitting your requirements. Shortlisting the top 3 out of the long list and then evaluating them as per your requirement. Another important aspect of selection can be of having a fewer numbers of vendors (may be one or two) which can provide multiple services under one roof as required by the SME business. This will not only save time and cost but also the trouble of managing multiple vendors and to get maximum ROI.

(NOTE:- Spl thanks to my LinkedIn fellow professionals who helped me in some of the above points by sharing their experties on question asked by me on LinkedIn – http://www.linkedin.com/answers/management/planning/MGM_PLN/757817-12608832?browseIdx=0&sik=1292672864693&goback=%2Eamq)

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