Modern businesses are more dependent on one another than ever, and the supply chains that lead to the creation of any given product are more complex than ever. This makes entirely new kinds of business products and services possible. However, it can also make supply chains fragile. When one supplier fails, the entire chain might break down. What should we do about this, and how can we get the best from our suppliers?
Let’s try to answer these questions by first looking at a supplier’s role and function.
What are suppliers?
A supplier is an organization that provides businesses with the products they need.
In some cases, a supplier might directly extract raw materials that other businesses need. It might take granite out of the ground so it can be sold to kitchen countertop manufacturers, for example.
Nowadays, suppliers tend to come in many forms. The most important are arguably wholesalers, like RS Americas – that is, intermediaries between manufacturers and primary industries. This helps to avoid supply chain disruption—if there’s a shortfall in granite from one part of the world, then the supplier can source it from elsewhere, with minimal disruption to the manufacturers who ultimately end up purchasing it.
Assessing your suppliers
Not all suppliers are built quite the same. It’s essential to regularly assess your suppliers and determine whether they’re offering a level of service that’s on par with their rivals.
The individual strengths and weaknesses of a supplier might be particularly relevant to your business. For example, you might shorten your supply chains by sourcing local materials. In this case, looking for a regional supplier with the relationships to provide these materials might be essential.
What are the advantages of a well-managed supplier relationship?
It pays to be on good terms with your suppliers. This is so for several reasons. You’ll be better forewarned of future interruptions in the supply of a given product or material. If you’re an important client, your supplier might mention when disruption is anticipated.
If you’re an important customer, you might also have greater scope to negotiate discounts. You might be able to negotiate fixed pricing arrangements, which will limit volatility for your business and make things easier to run on a day-to-day basis. A good supplier will also provide access to many different goods, saving you the expense and stress of maintaining relationships with many different suppliers.
How do you judge whether a supplier is a good one?
We’ve already mentioned the importance of periodically reviewing your suppliers. But precisely what does this entail?
Having a formal process for supplier evaluation can be very powerful. This evaluation might be conducted at fixed intervals—perhaps monthly, quarterly, or yearly. It should be based on standard cost-benefit analysis practices. Allowing you to identify and replace underperforming suppliers with better ones.