Choosing a supplier

Tuesday 14 February, 2012

By Duncan Heaney - duncan@consumerchoices.co.uk

Businesschoices.co.uk tells you how to source the best supplier, and why going straight for the cheapest option can be a very expensive mistake.

Picking a supplier is a bit like being a contestant on Blind Date. You’re faced with a number of potential partners, have to ask the right questions and make a decision based on their boasts and promises. Actually, it’s worse than Blind Date, because you don’t have Cilla Black to guide you gently through the process.

Tragically dated references aside, choosing a supplier can be incredibly daunting. Every step of the way, you’re faced with unique challenges, starting with “how do I even find one?”

Where can I find suppliers?

There are plenty of ways to source different suppliers, from online resources, to public or trade events. Here are just some of the channels you might want to try:

Directories - Physical directories like Yellow Pages and Thomson Local seem like anachronisms in today’s online-centric world, but if you’re looking for local suppliers, they can be incredibly useful.

Having said that, if the thought of using paper makes you want to drop your iPad in disgust, both these services offer websites too: thomsonlocal.com and Yell.com.

Personal recommendations - Friends, colleagues and business associates may be able to give you honest advice based off their experiences with a supplier. Talking to people is a great way to get an accurate idea of the strengths and weaknesses of a particular supplier.

Trade associations - it’s possible that your industry will contain a trade association that can help you locate a suitable supplier. Finding the trade associations is easy - there’s a handy database on the Trade Association Forum website.

Trade press - It’s worth subscribing to trade magazines. As well as useful information about your industry, these publications will often contain advertisements for suppliers.

Trade shows and exhibitions - Trade shows give you an opportunity to meet lots of suppliers in a single day, and talk to a number of representatives from these companies. It’s a good idea to check whether the exhibitors at an exhibition are relevant before you make the trek there - exhibitions.co.uk lists many shows, so it’s a good reference point.

Support organisations - Business support organisations, such as the Chambers of Commerce, can help match you with a supplier. If you find you need help, it could be worth getting in touch - you can find your nearest through the Chambers of Commerce website.

What should I consider when looking for suppliers?

Everyone likes a bargain - it’s satisfying to find something you want for the lowest possible price. It’s not surprising then, that many businesses head straight towards the cheapest supplier they can find.

But that’s a mistake. While price is important, there are other equally important factors to consider. If you fail to consider these, you could be left unable to respond to customer demands, fail to adapt to market changes or worse.

When you’re speaking with suppliers about creating a business arrangement, you should ask them to provide evidence that they are:

Reliable - it’s vital that you work with a supplier that can consistently deliver on time. If you’re left unable to fulfil orders, customers aren’t going to care that your supplier let you down - they’ll blame you and possibly take their business elsewhere.

High quality - Low quality supplies will lead to low quality products or services that might turn off customers. As a result, you need to ensure your supplier can not only provide you with high quality materials, but do so consistently.

Fast and flexible - Many small businesses find it better to make frequent small orders with suppliers. This ensures you don’t end up overspending on materials, and can react much faster to events or changes in the market. Of course, this strategy can only work if the supplier is flexible enough to respond quickly to your requests.

Good customer service - The key to a successful business relationship is communication. You should select a supplier that can keep you up to date as to the status of deliveries, potential delays and other information that might impact your business. The best suppliers will keep in touch themselves to make sure you’re happy, and find ways to improve their service.

Good value for money - It might be tempting to go for the cheapest option but, when it comes to suppliers, reliability, consistency and a collaborative relationship are worth paying extra for. Ultimately, it’s up to you to find a balance between price and quality that you’re comfortable with.

Stable - You should make sure that a supplier has the cash to fulfil your orders on time. We recommend performing a credit check before making any deals. After all, it would be a disaster if the company went out of business just when you need your goods.

Picking a supplier

When you have defined the criteria for potential suppliers, you should create a shortlist of four or five.

When you approach suppliers with the potential for a deal, you should make it clear what you expect from them, your budget, and the level of business you will be doing. In turn, they should be able to tell you how they will deliver on your expectations.

While it’s important to know what you want, you shouldn’t ignore what suppliers tell you. It’s worth asking them for suggestions on what you need for your business - they may have useful insights that can help you.

After you’ve spoken to each supplier, it’s time to make a decision. You should make your decision based on the criteria that matter most to you. For example, while price is important, perhaps quality is an even bigger concern? Is it better for them to be close than fast?

It’s also important to bear in mind that the actions of your supplier may reflect on your company, and not always positively. For example, when 150 Chinese workers threatened to commit suicide over unfair conditions at a Foxconn factory, the headlines didn’t shy away from pointing out it manufactured products for Apple.

You should consider the ethical and environmental practices of organisations you work with - aside from any kind of moral standpoint, you don’t want their poor reputation rubbing off on you.

Maintaining a supplier relationship

It’s important to set a service level agreement (SLA) before agreeing to work with a particular supplier. An SLA defines what you expect from your supplier, and helps you see when it is underperforming. You should also draw up written contracts - it will emphasise the expectations of both organisations, and gives both sides legal protection in case of disputes.

Contracts and SLAs help you monitor a supplier’s performance as you do business with them. That’s useful, because performance monitoring can also help maintain your relationship with that company. A performance review will help you decide whether a supplier is still meeting your expectations, and motivates it to keep living up to its SLA. Performance monitoring should be a two-way street though - and reviews are a good opportunity for the supplier to give your company feedback and suggestions that could improve the business.

In fact, from the moment you start working with a supplier, you should start building a strong relationship through good communication. Keep in regular contact, so you can deal with any problems before they become catastrophes. You should also keep them up to date on new plans and business strategy - they might be able to help you with advice on new materials to improve products and services.

More resources

If you need more information on working with suppliers, the government’s BusinessLink website has a lot of additional information.

The Chartered Institute of Purchasing and Supply website is also worth bookmarking. It offers a range of services to help businesses manage relationships with suppliers, as well as a lot of practical advice.