All businesses, no matter their size or focus, rely on their suppliers. But many businesses do not know how to thoroughly evaluate and maintain this critical business relationship, which can cause a discrepancy between your expectations and a vendor’s abilities. A mismatch between your needs and a supplier’s offerings can add costs, delays, and ultimately damage your reputation and your bottom-line.
According to Drew Greenblatt, president of Marlin Steel Wire Products, a common mistake is for companies to have a combative relationship with their vendors. Many times these businesses will hire purchasing people, “who have on brass knuckles and try to beat up on vendors to get better prices or better terms,” says Greenblatt. But this is a short-sighted, rookie mistake that focuses too much on price and not on partnership.
When finding a supplier, there is much more to consider than just the cost. Your goal should be to establish prices and terms that benefit both of you – there should not be a loser and a winner in a solid, long-term business partnership. This means spending a significant amount of time and effort to finding the best vendor for your needs that can provide your business with reliable, cost-effective, quality products.
Ray Carter, director of DPSS Consultants and author of the “10 C’s of Supplier Evaluation,” suggests that, because your supplier should be a long-term relationship and a significant portion of your costs, your search for the right vendor should be thorough. “Be prepared to ask probing, detail-oriented questions,” says Carter.
In order to find the best vending partner, you need to evaluate both your needs and their capabilities by asking very in-depth questions. These questions ought to include, but not be limited to:
1. How satisfied are the supplier’s current customers; do they have a track-record of keeping long-term relationships, or are they consistently shuffling through new customers?
2. Can the vendor meet your current capacity and do they have the resources to quickly meet a higher capacity, if your sales volume increases? These resources include their staff, equipment, cash-on-hand, materials, storage, etc.
3. Is the supplier committed to quality? Do they have quality initiatives within the organization? Have they had significant recalls or complaints?
4. How financially stable is the vendor, and what information can they provide up-front to demonstrate their stability (i.e. levels of cash-on-hand, outstanding debts, etc.)
5. How do plan to keep in communication? According to Greenblatt, you should consider your suppliers as part of the team, and that means communicating openly and frequently. He says, “Technology is great, but don’t overlook the personal touch of a phone conversation or face to face meetings… Make sure they understand your needs and expectations.”
6. Is the supplier priced competitively? Cost shouldn’t be the only thing considered – or even necessarily the first thing – but it is still obviously important to supporting your bottom-line.
Answer these questions for yourself and your business before you look into new vendors. Create a perfect-world scenario as well as a more realistic scenario, and compare your answers with your potential new vendor’s responses.
Ray Carter emphasizes that all of this – your questions and expectations, the vendor’s responses and promises, and all of the information generated by your research – should be in writing. “This will mean that information is ‘on the record,’ and that you can locate it easily in case of a problem,” says Carter.
Remember that these are not the only questions that need to be answered. Other things to consider include:
- At a personal level how you will work together
- Do you share workplace values (sustainability, employee appreciation)
- How much time, effort, and flexibility are you willing to put into the relationship
- Who will be in charge of communication and accountability
- What do you have to offer in the relationship
These questions and many more should be tailored for your specific business.
We will continue this discussion on vendor partners next week when we talk about specific methods to evaluate current suppliers, ways to maintain the partnership, and what to do if you don’t think your vendor is a good fit for your business. Until next time, send us your thoughts on your supplier relationship here at our blog, on Facebook, or on Twitter.
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