Competitive and savvy business owners know the importance of choosing reliable and quality vendors to ensure a robust supply chain and healthy profit margins. Here are five key factors to consider when choosing a vendor.
1. Set Your Criteria
Draw up a list of your fundamental business requirements including the products you need, the level of quality, immediate and future stock levels, delivery times and, of course, price. Research and pinpoint companies that have a good track record of supplying the products you need and then contact them to check whether they would be interested in forming a business arrangement.
2. Price versus Quality
While cheaper suppliers may look immediately more attractive, it’s vital not to choose a lower price at the cost of a quality product or service. At the same time, you shouldn’t just accept initial pricing lists at face value. Take time to negotiate and, if need be, ask for a face-to-face meeting with a supplier or their representative.
This applies not only to vendors’ adherence to specifications, but also whether the product is packed adequately, labeled correctly and includes agreed marketing materials.
3. Aligned Values and Broader Purpose
When choosing a supplier, you need to ensure they share similar goals and vision to you. For example, if you are selling an environmentally friendly product, customers will expect your supply chain to hold similar values about sustainable and fair trade practices. This is particularly important when looking to source raw ingredients ethically in the food sector, or manufacturing suppliers in the retail sector.
Just like any business activity that could go wrong, vendors may also make mistakes, such as sending you damaged supplies or failing to deliver on time. You need to have a mutually binding agreement and be clear from the outset about the returns policy, refunds, compensation for faulty goods and unmet delivery times. Failure to be vigilant about these factors can cause significant financial burden for businesses, especially if you rely heavily on multiple suppliers.
It’s important to be very well organized in managing multiple suppliers, their contracts, communications and dealings with you. In order to keep your suppliers in check, you can add them to a cloud-based management solution such as QuickBooks Online.
5. The Tender Process
Apart from approaching vendors directly, another option to determine who your supplier will be is to ask vendors to bid. The process of putting it to tender is more formal and complex as you will need to produce a detailed document outlining your specific needs, otherwise known as a ‘request for proposal’. You then evaluate the various supplier bids and negotiate accordingly before finalizing your agreement by executing a ‘master agreement’.
Selecting the right vendor for your business is crucial to ensuring you are able to deliver quality stock on time, at a competitive price and complying with your standards. Setting up and managing customers and suppliers using QuickBooks Online helps you manage your suppliers. Check out the tutorial on how to add suppliers to QuickBooks Online.