When you’re first starting a business, maintaining a healthy cash flow is going to be of paramount importance. A big part of this is going to be how good your suppliers are. By choosing the right companies to buy from, you’ll be able to steer clear of any major supplier performance issues, and ensure a bright future for your firm overall.
If you’ve never had any experience setting up supplier relationships, the whole task may strike you as somewhat daunting. It doesn’t have to be, though. Here are some of the best tips for choosing great suppliers.
In order to choose a supplier who’s going to be the best possible fit for your business, you need to have a keen understanding of all the organizational priorities and strategies at your business in order to draft a good strategy for going forward. From there, you can transcribe your strategy into solid criteria and requirements for setting up agreements.
Obviously, you’re going to have a lot on your plate with the day-to-day running of your business, and it can be very easy to get absorbed by it all, and apply a more piecemeal method for choosing suppliers. For example, if a business needed a supplier who deals with a specific raw material or commodity, a lot of buyers will look for suppliers in that niche who meet their most pressing needs in terms of price and value. This means that the criteria can change drastically depending on the needs of day-to-day operations, and end up becoming very ill-defined.
Use Performance Information to Create Selection Criteria
The more you understand about your current suppliers’ performance and that of your prospective ones, the easier it will be to decide which performance indicators are most important to the business. Obviously, it can be pretty hard to untangle the web of your supply chain, sales figures, and so on to pin down what the most important aspects of a supplier are.
Once you’ve established these, however, it can be much easier to set criteria for the on-boarding of highly qualified suppliers. When you’ve set these kinds of benchmarks, you can start to stack them up against the processes and values of different suppliers by going through their websites.
For example, you can find information on powder coating machinery online at ReliantFinishingSystems.com/powder-coating-equipment/. If a supplier can’t deliver what you need, it’s much better to know before you sign any contracts!
Link Up Sourcing and Supplier Management
In a lot of modern companies, sourcing and supplier management functions will go on completely divorced from one another, without sharing any information and interacting very little. While the sourcing professionals concentrate on tracking down, qualifying, and onboarding new suppliers, supplier management personnel tend to focus on managing the company’s current base of vendors.
Many businesses can survive while managing their supply chain like this, but it’s certainly not recommended. Unless there’s a lot of open communication between the two branches, in which they share a lot of information on important performance criteria and current supplier metrics, a company can go for years cheating themselves out of better options. The fact that you’re using a certain supplier, or have used them at some point in the past, is not sufficient reason to push additional business their way.
Referring back to the last point, make sure your sourcing and supplier management teams are staying in close contact, and using their combined resources to find suppliers who have been proven to be a good choice.
Deal with Any Potential Risks
Many firms in the modern business arena will require their suppliers to fill out risk questionnaires. If you’ve ever bought into a contract with a supplier, and ran into problems later on, then this is probably a smart move. After that, you should also make checking customer references part of the supplier screening process. You can find a pretty good article on this here: gcgeventpartners.com/questions-to-ask-when-checking-a-vendors-references/.
Verification and inspection should also be a part of your process, particularly if you’re going to be buying from offshore suppliers. You can either organize this through your own resources, or outsource it to a reputable company which deals with verification.
If you’ve been running your firm for some time, then dealing with these processes may sound like a lot of hassle which you don’t have time for. However, there are a lot of modern resources which makes this phase of supplier evaluation so much easier. More and more, modern businesses are reaching out to third-party data in order to make sure suppliers aren’t on any government watch lists, or have been outed as financially unstable. By understanding any potential risks, you’ll have a much better chance of finding your perfect supplier base.
Implement Your Qualification and Keep on Reviewing
After following this advice, you might have created the best formula for selecting suppliers ever seen in your industry. However, that doesn’t mean that it’s going to stay that way.
As you’ll be well aware by now, pretty much all businesses are in a constant state of change, and little differences in the way your suppliers run things can have a huge impact to how beneficial your relationships are with them. You can’t let your supplier qualification and evaluation simply happen. It needs to be an ongoing, tightly managed process which is thoroughly understood by everyone involved in strategic sourcing, and discussed through a very open communication culture.
Make sure you and your upper management are constantly measuring supplier performance, and jumping on any big issues as soon as they crop up. This will ensure that your suppliers are not only a great asset when you first start buying from them, but for the foreseeable future as well.
If you start reaching out to other companies without an airtight supplier selection strategy, then you’re only going to put yourself at risk of costly or unsustainable choices. To make sure you keep your purchases high in value, and that you maintain a strong brand and competitiveness, keep this advice in mind going forward.