How to deal with companies (suppliers)

How do you find suppliers and work with them? Whether you are looking for raw materials for manufacturing or finished products for resale, this guide will help you find great supplier relationships and build working relationships with them.
Suppliers are essential to almost every business. Without raw materials to make what you sell, or manufacturers to provide what you resell, you will struggle to grow.

There are also many supplies and services your business consumes as part of its overhead, from paper clips to internet access. Suppliers and vendors, the terms are used interchangeably here, can do more than just provide you with the materials and services you need to do business. They can also be important sources of information, helping you evaluate the potential of new products, track competitors’ actions, and identify promising opportunities.

Vendors can also turn into partners, helping you cut costs, improve product designs, and even fund new marketing efforts. If you do not make choosing good suppliers and vendors part of your growth plan, you will probably regret it.

Evaluating suppliers
Suppliers can be divided into four general categories:
Manufacturers: Most retailers buy through company sales representatives or independent representatives who handle the goods of several different companies. Prices from these sources are usually low, unless the retailer’s location makes shipping costly.
Distributors: Also known as wholesalers, brokers, or jobbers, they buy in quantity from several manufacturers and warehouse the goods for sale to retailers. Although their prices are higher than the manufacturer’s, they can supply retailers with small quantities from a variety of orders (some manufacturers refuse to fill small orders), which often results in a lower shipping bill and faster delivery time from a nearby distributor, offsetting the higher cost per item.
Independent craftspeople: Exclusive distribution of unique creations is frequently offered by independent craftspeople who sell through representatives or at trade shows.
Import sources: Many retailers buy foreign goods from a domestic importer, who operates much like a domestic wholesaler, or, depending on your familiarity with overseas sources, you may want to travel abroad to buy goods.

What makes a good supplier?
Many startups focus on one attribute of their suppliers: price. Remember, too, that suppliers are in business to make money. If you press them for a reduction on every invoice, or fail to pay promptly, do not be surprised if they stop calling.
After price, reliability is probably the key factor to look for in suppliers. Good suppliers will ship the right number of items, as promised, on time, so that they arrive in good condition. Sometimes you can get the best reliability from a large supplier.

These companies have the resources to devote to backup systems and sources, so that if something goes wrong, they can still meet their responsibilities to you. However, do not neglect small suppliers. If you are a large customer of a small company, you will get more attention and possibly better service and reliability than if you are a small customer of a large supplier. You should also consider splitting your orders between two smaller companies.

Stability is another key indicator.

You will want to sign up with vendors that have been in business a long time and have done so without changing businesses every few years. A company that has had senior executives in place for a long time is another good sign, and a strong reputation with other customers is a promising indicator of a company’s stability.
When it comes to your own experience, look for telltale signs of vendor trouble, such as shipments that arrive earlier than you requested, as this can be a sign that the vendor is short on orders and needs to speed up cash receipts.

Do not forget location.

Goods ordered from a distant supplier can take a long time to reach you and can quickly generate additional shipping charges.

Find out how long a shipment will take to reach your loading dock.

If you are likely to need something fast, a distant supplier can be a real problem.

Also, determine the supplier’s shipping policies before you order. If you order a certain quantity, for example, you may get free shipping. You may be able to combine two or more orders into one and save on shipping costs.

Better still, find a comparable supplier closer to the warehouse to preserve cost savings and ordering flexibility.

Finally, there is a set of attributes that can generally be described as competence.

You will need suppliers that can offer the latest, most advanced products and services, and they will need well-trained employees to sell and service their goods.

They should be able to offer a variety of attractive financial terms on purchases and have a realistic attitude toward you and their customers, so that they are ready and eager to work with you to grow both your businesses.

Changing your supplier relationships:
You may not need to find new suppliers to get a new deal. You can usually get discounts, obtain improved service, and receive the other features you need by making a request of your current suppliers, although it may not be as simple as just asking.

Here are some options and negotiating strategies for turning mediocre suppliers into top-tier ones:

- Get discounts:

If you walk into a department store and buy a pair of shoes, you pay the same price any other shopper would, but business-to-business commerce is more complex. Companies that sell to other companies usually have a whole range of listed fees, and they offer discounts of 50% or more depending on the quantity purchased, the terms, the length of the relationship, and other considerations.
You may be able to comfortably meet some of these requirements, qualifying you for a lower price. To find out, ask about discounts and what is needed to earn them. You may be able to get anything from an interest-free loan in the form of trade credit to a substantial discount for paying early.

- Improve service:

By reaching the people with authority at these companies in order to improve the services they provide to their customers at other companies.

- A better relationship:

Not every customer wants to deal closely with suppliers, so the fact that your suppliers do not offer to work closely with you to improve quality, reduce defects, and cut costs does not necessarily mean they do not want to. They may have the impression that you are reluctant. So if you want a closer working relationship with your suppliers, tell them so.

You can also drop a hint that those who are unwilling to work with you may see some of their orders shifted to those who are more receptive. Either way, you will know whether it is your supplier’s reluctance, or its perception of your reluctance, that is standing in the way.

- Make a change:

Having fewer vendors is usually better than having many. Reducing the number of vendors you deal with cuts the administrative costs of working with many. Closer relationships with fewer vendors let you work together to control costs. Getting rid of troublesome vendors can quickly increase the efficiency of your purchasing and administrative staff.

So how do you decide when to change vendors? Here are the key areas to keep in mind:
Unreliability:

When a vendor’s shipments start arriving late, incomplete, damaged, or incorrect, it is time to consider looking for a new supplier. Every company has problems from time to time, so check into the matter before dropping the vendor. Vendors may run into temporary difficulties as a result of implementing a new product line, a shipping procedure, or a training program. If you stick with a vendor through a rough patch, you may be glad you did, and they may be more willing to see you through a cash-flow crunch in the future.

Lack of cost competitiveness:

Sometimes vendors fail to change with their industries. When your vendor’s competitors start coming in with offers on comparable goods that are lower than your current supplier’s, you need to investigate. Point out the problem to your current supplier and ask for an explanation. If you do not like what you hear, it may be time to consider taking up some of those offers from competing suppliers.

Insularity:

Some suppliers will let you visit their plants, talk to their workers, quiz their managers, obtain and interview references, and even examine their financial statements. These are the kinds of suppliers you should look for. The more you know about your suppliers, the better you can assess whether you should keep dealing with them, and if they keep you at arm’s length, perhaps you should cut them off.

Extra selling costs:

The figure at the bottom of the invoice is only the beginning of the cost of dealing with suppliers. You have to allocate funds in advance to draw up specifications, issue requests for proposals, evaluate them, check references, and qualify your suppliers. You have to place the order, negotiate terms, inspect the goods when they arrive, and deal with any shortages, damage, or other errors. Finally, you may have to train workers to use the newly arrived goods or buy more equipment and materials to make use of them.

While some of these costs are unavoidable, some can be attributed to individual suppliers. If too many costs are built into the selling prices, check out some other suppliers.