Choosing suppliers for your business

Managing supplier relationships


Suppliers play a central role in the success of your business and your ability to grow profits. It is therefore important to manage your suppliers carefully, to maximise the value of these relationships.

Negotiate with your suppliers

Before entering into a contract, you will have to negotiate a deal with your suppliers. Negotiation commonly focuses on costs, but this doesn't necessarily mean that you must pursue the cheapest possible price. You may want to negotiate other factors such as delivery times, payment terms or the quality of the goods.

When you finish negotiating the terms and conditions of your relationship, it is important to draw up written contracts. See how to negotiate supplier contract.

Agree service levels

It's a good idea to agree service levels before you start trading so you know what to expect from your supplier - and they know what to expect from you. Make it clear what your priorities are and how you will assess their performance. A written contract can help you avoid uncertainty and minimise the risk of disputes.

Maximise the value of your supplier relationship

From the start, aim to build a good relationship with open communication between yourself and your suppliers. Regular contact allows you to deal with any problems before they escalate and find opportunities to work together more effectively.

Look for opportunities to deepen the relationship with key strategic suppliers. Explain the direction of your business, any new plans you intend to pursue, and consider how the supplier could participate. For example, your suppliers may be able to give you advice on new technologies and materials that you could use to improve your products.

Supplier performance reviews

Regularly review your suppliers' performance. The reviews are a key component of supplier performance management, which can help you reduce costs, mitigate risks and drive continuous improvement in your business.