Introduction
Choosing the right manufacturers and or suppliers is mandatory for you if you have to succeed in your business as it forms the basis for providing the most appropriate goods at suitable prices within the right framework of time. In this article, we discuss more in detail as to why it is essential, the key factors you have to keep in mind while choosing the suppliers, and how to find the right ones. We need to caution at this stage that these three are interrelated, and they have been discussed separately to provide clarity and practical utility. Still, for being done so, it should not be treated as though they can be seen in a compartmentalized manner as most of the elements are common to all of them.
It is necessary to distinguish between a manufacturer and a supplier differentiating the meaning of each of the terms. Such differentiation is warranted because they do not mean the same, but at times, erroneously used interchangeably. While manufacturing connotes a singular entity and activity, supplying has a broader scope, and extends to anyone who is vested the ability to provide you with the products. Suppliers can, therefore, be manufacturers, wholesalers, stockiest, distributors, etc. For the sake of brevity, we are using the term supplier here.
Why is it important?
It comprises the first step from the angles of quality, affordability, and timely delivery. Choosing a supplier who is not a good fit for you could cause you financial losses and mental hardships in the form of poor product quality, delays in shipping, and the receipt of the products. That can result in your ending up with unsatisfied customers and ultimate financial and reputational losses.
Key Factors
Once you have identified potential suppliers, here are some key factors which you need to apply for choosing out of them:
a. Price
Managing the finances by keeping a tab on the cost is fundamental to remain competitive. The prices have to be affordable, but you need to keep in mind that alone would not ensure your success. Cheap does not always mean you get the best value for your money. Affordable prices, along with the quality of the goods, go hand in hand. If you err on quality, it may lead to your incurring extra costs on returns and replacements and run the risk of losing the clientele and damaging your reputation.
b. Reliability
It refers to the delivery of goods on time. As a thumb rule, it can take, large suppliers endowed with better capabilities to deliver as they back their business with adequate resources, and by putting proper systems in place. Nonetheless, this does not automatically lead to the conclusion that you have to shun smaller suppliers because you can develop a one-to-one relationship with them. They may respond to you faster, meet your needs during rush seasons when an order has completed quickly, and may even hold the stocks for you if you happen to be their primary customer.
c. Stability
Stability assumes importance, especially in a scenario wherein you enter into a long-term contract or whether you need to rely upon a supplier who is the chief one who can cater to your specialized needs. It calls on your part to carry out due diligence on the supplier.
d. Location
Location matters for the reasons that are dealing with suppliers who situated far away from your or overseas mean more extended delivery period, additional freight, and the product can also be fraught with higher rates of duties, which can fluctuate. If you have to choose this modus, you need to minimize your risks, for instance, by placing bulk orders, negotiating better freight rates, etc.
How to find the right ones?
Given the fact that there is no one universally acceptable answer to this, we have zeroed in some broad guidelines, which you can keep as guidelines and apply those that fit best into your business.
a. Set the criteria
You need to create selection criteria, which your manufacturer/supplier would have to comply with. Choose a mix out of the following elements that would influence your business positively.
- Setting up your supply chain system by giving adequate importance to factors. Like the minimum and maximum order quantities. Terms of payment, lead time, specifying the methods of delivery, defining quality standards, return policies, warehousing. And inventory management with well-defined storage and handling facilities.
b. Defining the methods of sourcing
- You have to put in place methods which you would use to find suitable suppliers. It could be making decisions based on such parameters. As to whether you would place an advertisement in trade publications with which you call for bids. Or identify them through researching trade bodies or online by researching B2B databases. Each of the methods has its own positive as well as limitations. For instance, when you publicize your requirements, you need to incur a preoperative cost by incurring administrative expenditure. Still, you may get credible sources, whereas if you are using the online methods, some of these costs can be lesser. Again, you incur the risk of becoming vulnerable to online scams that may wipe away your capital. You need to exercise caution, and once satisfied that you take adequate care, the best way is to seek a Request for Proposal (RFP) or Request for Quotation (RFQ). Whichever method you choose, you should ask the bidders to furnish your details on the processes you use, satisfied with the stability, which we have discussed earlier, etc.
c. Evaluate the bids
- The bids you receive would have to evaluate against a checklist; for this, you can use standardized procedures set by such bodies, for instance, The American Society for Quality. Since evaluation has to be carried out from multiple angles (technical, financial, etc.). It has to be by a multidisciplinary team comprising of technical, business, supply chain, and operational management experts.
d. Monitor the performance
- Monitoring has to carried out both in a concurrent manner and after the completion of activity also. Simultaneous monitoring helps in identifying the problems. While the various processes carried to identify the snags and take immediate remedial action. Post evaluation, after completing the order cycle, right from procurement to the final selling. Will helps you to review as to whether what has accomplished could be done in a better way. And when done, so would it bring down your operational costs and improve your revenues and profitability.
Key Takeaways
The supplier-buyer relationship is a complex phenomenon, and there is no magic wand that provides an instant fix. It is an evolving one, which calls for continuous communication between the stakeholders. Wherein the meeting of minds has a more significant bearing as it would provide practical solutions. Nonetheless, the useful utility of this article is that it sets the stage for you to explore the opportunities systematically. To identify what matters to you most. And cement the relationship when you make the meeting of minds possible in the real world.
Keywords: SUPPLIER, QUALITY, CHOOSE, METHOD, PRODUCT, IDENTIFY, COST, ORDER, manufacturer or supplier, DELIVERY
