11.03 – Choosing The Right Supplier
Selecting the wrong supplier can be both stressful and costly. This section provides essential pointers for finding a reliable supplier that meets your business needs.
Key Questions for Evaluating Suppliers
When assessing potential suppliers, consider the following questions:
- Do they offer a guaranteed level of service?
- Do they have a strong business track record and evidence of financial stability? Check their accounts at Companies House.
- Do they have clients in your business sector and local area?
- Can they provide client references and impartial evidence of their quality?
- Can they meet rushed deliveries in case of emergency?
- What level of after-sales support do they provide?
- Do they offer value for money when compared to competitive services?
- Can you build a productive working relationship with them?
Evaluating Trading Terms
Buying from suppliers is essentially a mirror image of selling. As you negotiate, remember that suppliers are selling their services. Even with no intention to mislead, misunderstandings can occur. Always get agreements in writing.
Steps to Establish Trading Terms
- Verify Capabilities: Ensure that suppliers can deliver what you need and what they claim to offer by checking references.
- Negotiate Prices: Despite limited buying power, room for negotiation always exists. Research multiple suppliers to understand price ranges and aim to negotiate 10% below your target price. Be prepared for suppliers to initially claim non-negotiable prices.
- Explore Contract Terms: Examine delivery terms, payment conditions, risk and ownership, warranties and guarantees, termination clauses, arbitration rules, and governing law for dealings with overseas suppliers.
Building Supplier Relationships
Maintaining good relationships with suppliers is crucial for handling potential issues. Keep suppliers informed of your plans and intentions. This approach doesn’t commit you to buying extra products but encourages suppliers to support your goals, fostering a collaborative value chain.
Cost Management
Many businesses overpay for goods or services, leading to lower gross margins and poorer performance compared to competitors. Rather than seeking new suppliers immediately, discuss terms with your current supplier to potentially improve your deal.
Benefits of Online Buying
Buying online offers significant advantages for small firms. It can reduce costs, save management time, and improve cash flow by enabling just-in-time supply. The range of products and services available online is vast, covering everything from office supplies to heavy machinery.
Methods for Online Buying
- Joining an E-Buying Group: Online buying groups, also known as trading hubs, e-marketplaces, online communities, aggregators, and cost reducers, gather multiple suppliers in one place. This allows for easy comparison shopping without leaving your office. For example, you can quickly compare prices for office supplies or larger items like office furniture and photocopiers.
For a list of top players in the Group Buying space, check the Welp Magazine report. - Participating in Online Auctions: Auctions allow you to pay only what you’re willing to spend, though you may need to wait for the right deal. This method is ideal for purchasing items on your business wish list that are not immediate necessities.
- Bartering Online: Online barter exchanges enable you to trade your company’s products and services for those of other businesses. This approach is particularly useful for start-ups or companies with limited cash flow. You can swap services like ad space for accounting services or consulting for computers.
By following these guidelines, you can effectively choose suppliers that align with your business needs, negotiate favorable terms, and leverage online buying to optimize costs and efficiency.
