What are the 4 most important factors for business when choosing suppliers?

There is a lot of hard work and planning that goes into launching a business. As a business owner, you are constantly looking for opportunities to manage current operations smoothly and expand your business while remaining competitive.

As a business begins to take shape, owners need to make all sorts of important decisions such as where to source products or materials from while achieving the best value for their money.

This article will help you choose the right supplier from the endless list of potential suppliers on the market.

Below, you'll learn about key factors to keep in mind when shopping around for the right supplier to fulfil your business needs.

Determine Your Search Criteria

It is important to take the time and effort to develop comprehensive criteria that meet your business needs before you even begin searching for suppliers to source your goods and services.

The best way to map out supplier criteria is to narrow down a list of goods and services that you need in the short and long term, including any raw materials, products, or services that go into producing your final product.

These may include the following:

• Type of materials required
• Quantity (bulk or wholesale)
• Quality of materials required
• Availability and delivery times
• Purchase costs
• Packaging and labels

For instance, suppose you own a company that manufactures t-shirts. In this case, you will need to source fabrics, dyes and colourants, and embroidery machinery among other raw materials.

Once you have a better idea of specific products and materials you might need for your production process, you can narrow down a list of vendors who fit your criteria.

Attention needs to be paid to additional elements as well when it comes to choosing a supplier.

Importing Vs. Sourcing Locally

When it comes to deciding whether or not your business should import its goods and materials from abroad, the right answer isn't always clear.

The only correct answer is one that best caters to the needs of your business and upholds brand image.

Sourcing materials locally goes hand-in-hand with modern brand values, especially in this age, brands are increasingly trying to connect with eco-conscious customers who want to buy and consume locally.

There are, however, a number of benefits of importing your products or materials from other countries.

For instance, businesses that import from massive manufacturing hubs such as China almost always benefit from lower prices and greater availability of materials.

As a result, importing from these markets is often more cost-effective and reliable for drop shipping businesses looking for a dependable supplier rather than sourcing materials locally.

However, these lower prices and increased reliability come with risks. For instance, cheaper products and materials bought from overseas markets are often received in poor conditions due to their lengthy shipment times. The overall condition of sourced items is generally compromised compared to items you would find in local markets.

Still, contracting with a local supplier is often preferred by smaller businesses because it affords them a chance to cultivate a network with major suppliers in the region and establish a brand name in the community while providing products or services to their local customers.

Shipping locally is also less time consuming than importing from international markets.

Material Quality

The quality of raw materials acquired to keep your production process running will significantly impact your bottom line regardless of your industry.

For example, low material quality will reflect poorly on the end product and ultimately negatively impact consumer satisfaction and brand reputation.

Moreover, the materials you acquire may be subject to certain laws especially if you're sourcing chemicals or other types of hazardous materials for manufacturing purposes.

Therefore, prior to signing any contracts with a new supplier, thoroughly evaluate the quality of the materials they supply.

Make sure the supplier you choose has both the capabilities and a proven track record of supplying businesses with the quality of materials you need and that your customers expect

Cost And Budget

Alongside placing heavy considerations on the quality of sourced materials, choosing a supplier also entails having clarity on the prices of short and long-term supply deals.

Keep in mind that just because a supplier is charging a higher price for certain materials, that does not automatically translate into improved quality of the given materials.

It is critical for business owners to be fully aware of the distribution of supplier charges including overall prices, taxes, and any other administrative fees that may be relevant to working together.

Reliability

Business owners realize that there isn't any shortage of vendors in the market. That being said, in a majority of cases, only a handful of vendors will meet each sourcing criterion and eventually prove to become a reliable supplier for the business.

Suppliers' reliability is affected by aspects such as whether they have a dedicated customer service channel or can meet the demands of your business both now and in the foreseeable future.

Therefore, it is crucial to search for suppliers with proven track records of satisfied, longer-term clients rather than suppliers with a high volume of short-term clients.

Brand Values And Compatibility

A match of organizational culture and values alongside ease of communication should be looked upon closely when choosing a supplier from a list of potential vendors.

In this consumer-centric age, individuals are seeking out brands that share their values, beliefs, and ethics.

In other words, successful brands need to be aware of the values and beliefs of their target audience. They need to closely match those values if they wish to remain relevant to their customers.

Thus, as a business owner, it is imperative that you build supplier relationships with companies that share similar values, culture, and moral integrity.

In turn, better supplier relationships result in higher satisfaction for your customers and sustained profitability for your business.

Are you looking for new and innovative ways to make your business procurement process simpler and more efficient?

Proqura is currently one of the best, leading procurement software providers on the market. Signup today for a demo of Proqura. Read our Procure-To-Pay Blog or Contact Us today to learn more.

12th May 2022

Choosing a new supplier is one of the most important decisions a business will make, especially as a retailer relying on outsourced goods. A good working relationship can lead to an increase in sales and reliable service. A bad partnership can lead to disappointed customers, unfulfilled profits and worst-case scenario, a failed business.

If you want to find a new supplier, or are currently researching potentials; then make sure you take these five factors into account, to help find the supplier that is right for your business.

1. Supplier cost

Probably the most obvious – but equally important – factor to take into consideration when looking for new suppliers, is cost.

Of course, you’ll have a figure in mind as you’ll know which products you’re looking for, and how much you’re willing to pay. Even so, prices between suppliers can vary, so it’s important to shop around and see who offers the best deal. For instance, some suppliers may offer discounts on bulk-buying; or others may offset higher costs with better quality products.

You should weigh up all of the options when it comes to costs, before deciding which supplier is best in that respect.

2. Quality

There’s often a correlation between cost and quality: the more expensive the product, the better the quality. Regardless of price, there is still a predetermined, agreed level of quality, and you want to be sure that your expectations are met.

After all, the last thing you want to do is market your products as high-end, when your supplier sends you something completely different.

Quality doesn’t just refer to the physical product itself, but its associated aspects too. Are the products packaged adequately, protecting them in transit? Are they labeled correctly? Speak with potential suppliers to ensure that you’re fully aware of what they will offer you – you don’t want to sign a contract and then be disappointed.

3. Reliability and previous experience

It’s important to remember that when choosing a supplier, you’re essentially entering into a long-term relationship with them. It’s similar to hiring a new recruit – you’ll want to see references.

Don’t be afraid to ask for them: it makes sense that you would want to hear from businesses who have worked with specific suppliers in the past, as they can give you an honest account of what the partnership was like, and list any good or bad points.

If you’re deciding between two suppliers, references can make all the difference when deciding who to choose.

Your chosen supplier will directly reflect upon your business. If they send over a batch of products two weeks late, the customer who ordered that product will blame you, not your supplier.

Expectations are only met when they are clear on both sides. A good supplier relationship is built on shared cultural goals and attitudes. Speak with suppliers directly to find out how they like to work with other businesses. If you want constant communication but they prefer to just “get on with it”, then realistically, that’s not going to work.

When speaking with suppliers, whilst you’ll have questions to ask them; it’s likely they’ll have equally as many questions for you. Use this time to gauge whether your culture and expectations are similar, as you should get a good idea of whether or not the relationship will work.

5. Location

When choosing a supplier, location is a big factor to consider. If you’re a local business that has built your brand on expertise in your area, then you’ll want to focus on finding a supplier who is located nearby, and shares your values.

On the other hand, if you’re looking to expand internationally, then you may wish to recruit a supplier that’s further afield. For example, if you’re a UK business looking to start operations in Denmark, it makes sense to partner with a Danish-based supplier; as they will be clued up on business rules and regulations, and can ship products easier.

Ultimately, finding a supplier is not a decision that’s to be taken lightly; and it can take time to find the right relationship. Check out more information on sourcing a new supplier.

If you need a place to start, our supplier management software will help you to keep on track of your current suppliers, allowing you to evaluate their performance in terms of prices, quality, and general level of service.