How to Choose Your Business' Suppliers

For any business, regardless of what industry it is operating in, finding the right suppliers is integral to the success. The reason being that they are the ones who can make or break your business. Choosing a wrong supplier will have dire consequences on your overall business performance eventually as people will begin to shift to your competitors due to the substandard quality of your products. This could lead to even a worse scenario in which your whole target market will generate bad word of mouth about you, leading to a bad brand perception and reputation in the market.

A supplier adds value to your business by providing goods and or services, which are ultimately sold by the business to end customers. For that reason, the quality of suppliers a business has a direct effect on the quality of its products.

Most of the companies only procure raw materials from evaluated and registered suppliers that have passed scrutiny and meet a strict set of criteria. The types of suppliers vary according to your business needs, organizational size, and market growth rate. Suppliers are like but business partners without whom your whole business set-up will collapse. Therefore, make sure that you build this partnership after a careful appraisal of the suppliers.

Strategic Business Relationships

Follow the following guidelines to pick the best suppliers for your business, who will help you in profit generation and business expansions.

• Price:

Price is the key concern of any business, especially when they are considering a supplier because if only you get raw materials at a reasonable cost can you turn your manufacturing process in to a profitable venture. However, price is not the only thing that should be evaluated before choosing a supplier.

• Service-level Agreements:

If your supplier fails to provide you a good quality of products or requires a lot of time to deliver, it will affect your business. It is best to sort all these things in the service level agreements only to avoid future discrepancies in the business processes. Remember, for a supplier to agree to your terms you will have to agree to some of his terms, as well. It should be a win-win situation so that you both work for each other benefits, resulting in better business performance. Before signing a service-level agreement make sure that the supplier clearly understands and agrees to all the terms. Moreover, you should steer clear one time suppliers because they lack commitment and fail to deliver.

• Supplier Capacity and Reliability:

Assess the supplier’s supply capacity before deciding to work with him. Your and the supplier’s capacity should be balanced so that you do not have to wait for your material to be developed before every production run. You can conduct a little survey of the supplier’s existing customers so as to ascertain whether he will be able to meet your demands or not.  Do check the level of stocks maintained by a supplier at a particular time to determine how long you will have to wait for your order to be delivered. This can help you avoid any possible delays that can affect your customer satisfaction ratio.

• References:

Without good references, a supplier’s credibility remains questionable. If your supplier turns out to be unreliable, your reliability in the eyes of your customers is what will suffer. For that reason, cancel your contracts with all the suppliers who have let you down because they make you look bad in the eyes of your customers.

• Competitive Pricing:

The key to effective cost management is to find a supplier who offers you competitive pricing, so that you are able to generate a higher profit margin. Building long-term relationships with your suppliers always help as they give the regular customers more discounts and better pricing then the one time customers. Also, that way you have more negotiating power especially, if you make bulk purchases. Getting quotes for the same quality product from different suppliers helps you pick up the one that offers you the most value for your money.

• Productivity:

In order for your supplier to be able to add strategic value to your business he needs to be highly productive. This means that your suppliers should work hard to ensure your demands are met right on time at a competitive price so that you can transfer the same value to your end customers.

• Lead-Time:

The lead time offered by a supplier impacts your whole production process and consequentially, your end product’s market distribution. If your products fail to reach customers on time, they will switch to substitutes, and a good number of them might not come back.

• Quality:

Last but not the least, quality is what you need to look out for the most because a poor quality product will  fail to satisfy your customers, and the business will have to bear the cost of quality deficiency with additional support costs. Not only that low quality products force the customers to look elsewhere to fulfill their demands.