Guide

Choosing the right suppliers

Criteria for selecting a supplier

Suppliers play a critical role in helping companies succeed. In order to find the right ones, businesses need to consider a number of critical factors, including:

  • price
  • value for money
  • quality
  • reliability
  • responsiveness
  • flexibility

Shared culture and location can also play a key role in a successful partnership. Effective purchasing should focus on what your business needs and what you want to achieve.

Value for money
If you are a start-up, a key consideration in choosing a supplier may be affordability. However, cheap suppliers don't always represent the best value for money. If you want reliability and quality from your suppliers, you'll have to decide how much you're willing to pay for your supplies. It is important to strike a balance between cost, reliability, quality and service.

Quality and reliability
The quality of your supplies needs to be consistent - your customers associate poor quality with you, not your suppliers. Equally, if your supplier lets you down with a late delivery or faulty supplies, you may let your customer down.

Speed and flexibility
Being able to place frequent, small orders lets you avoid tying up too much working capital in stock. Flexible suppliers help you respond quickly to changing customer demands and sudden emergencies. If you want to cut down the time it takes you to serve your customers, suppliers that offer you a quick delivery service will rate higher than those that compete on other factors - for example, on price alone.

Strong service and clear communication
Communication is important in ensuring a good working relationship with your supplier. From the initial briefing, through continual feedback and routine meetings, your supplier should communicate openly and regularly. You need your suppliers to deliver on time, or to be honest and give you plenty of warning if they can't.

Financial stability
It's always worth making sure your supplier has sufficiently strong cashflow to deliver what you want, when you need it. A credit check will help reassure you that they won't go out of business when you need them most. You can run a company search with WebCHeck.

How many suppliers do you need?

It's well worth examining how many suppliers you really need. Buying from a carefully targeted group could have a number of benefits:

  • it will be easier to control your suppliers
  • your business will become more important to them
  • you may be able to make deals that give you an extra competitive advantage

However, it's important to have a choice of supply sources. Buying from only one supplier can be dangerous. You will run into problems if they let you down, or even go out of business. Equally, while exclusivity may spur some suppliers to offer you a better service, others may simply become complacent and drop their standards.

Focus your efforts on choosing and managing strategic suppliers who provide goods or services that are essential to your business. A strong relationship will benefit both sides. You want your suppliers to make every effort to provide the best service possible. You're more likely to create this response by showing your suppliers how important they are to your business. See more on managing supplier relationships.