The role of suppliers is the key to an optimally operated supply chain. Correspondingly, a strategic approach to maintaining these performing suppliers is a vital aspect of a successful business.
For example, suppose you are running a vegetable outlet. Now, your business will need someone to supply you various vegetables to sell. Hence, there is no doubt that your services depend entirely on business suppliers.
So, in this article, we will discuss what is a business supplier and their applicable parameters in detail. Keep reading for a comprehensive insight.
Table of Contents:
1. What Is a Supplier in Business?
A supplier is an individual or a business entity that provides a product or service to another entity. The primary role of a business supplier is to deliver high-quality products from a manufacturer or producer at a reasonable price to distributors or retailers for resale. Moreover, a supplier in a business is someone who acts as an intermediary between the manufacturer and retailer. A supplier ensures efficient communication that helps both entities be future-ready and the stock is of sufficient quality.
2. Types of Suppliers
Suppliers are necessary for any retail business. Depending on your inventory selection, you may need a few or dozens. Suppliers can be divided into four general categories.
Most retailers buy through company salespeople or independent representatives who handle the wares of several different companies. Prices from these sources are usually the lowest unless the retailer’s location makes shipping freight costly.
Also known as wholesalers, brokers, or jobbers, distributors buy in high quantities from several manufacturers and warehouse the goods for sale to retailers. Although their prices are higher than a manufacturer’s, they can supply retailers with small orders from various manufacturers. (Some manufacturers refuse to fill small orders.) A lower freight bill and quick delivery time from a nearby distributor often compensate for the higher per-item cost.
Exclusive distribution of unique creations is frequently offered by independent craftspeople, who sell through reps or at trade shows.
Many retailers buy foreign goods from a domestic importer, who operates much like a domestic wholesaler. Or, depending on your familiarity with overseas sources, you may want to travel abroad to buy goods.
The Importance of a Supplier in the Product Life Cycle
Believe it or not, a supplier’s role in a business can be more complex than you would think. Why is the role so important in the product life cycle? The retailers expect a certain level of quality, and the producers/manufacturers hope that suppliers sell a lot of stock regularly. This requires a business supplier to be negotiable and be clear about relationship management.
More essential elements of a supplier’s role include:
- Best price possible: Suppliers must guarantee the best price and quality to retailers to maintain trust among them. That will ensure repeat business in the future.
- Compliance with local laws: Suppliers should comply with all relevant laws and standards, including human rights protection and child labour.
- Equitable transactions from all retailers: Suppliers must provide equal opportunities for all retailers to do business with them. They should not reject a retailer due to their location, or any other reason.
- No conflict of interest for suppliers: Suppliers should not do business with those who may have a conflict of interest with them. This can include family members, friends, and new or old colleagues. The aim of this practice is to decrease the likelihood of unfair treatment among other customers.
4. What Is Supplier Relationship Management?
Having a proper supplier association is paramount for sales and business. But what’s more crucial? It’s the upkeep and management of good supplier relations.
As we see a rise in market saturation, uncertainty regarding employment, volatility rate, and the ever-ongoing pandemics and climate change, it has become necessary for manufacturers to consider managing and maintaining customer relations.
So to embark on the activities, there is a term known as Supplier Relationship Management that fulfils the purpose.
5. What Are the Benefits of Supplier Relationship Management?
Benefits of Supplier Relationship Management (SRM) is a methodical and structured procedure to manage the suppliers efficiently and effectively. It is crucial to manage these relationships to ensure an efficient supply of products and services.
In other words, SRM steers you on the path to maintain and manage healthy associations with your suppliers in terms of vendor data, life-cycle management, rankings, threats associated, performance and compliance.
Remember, a good SRM is always a priority for businesses and manufacturers.
6. Supplier Relationship Management Best Practices
- Build Lasting Relationships: If a business intends to use a retailer more than once, it should build a lasting association whereby it offers an easy conversation whenever required. This association will ensure that they will understand the full abilities of their suppliers, so the business knows when they are asking too much from their suppliers. Building a solid relationship will ensure that their suppliers will look after the business’s needs in the future before others.
- Pay Suppliers On-Time: This seems like a no-brainer but paying suppliers on time is a great way to maintain a good supplier relationship. Companies that poorly track deliveries and orders send out their payments with a lot of delays, leaving the supplier in a difficult spot because of an insecure cash flow. This also affects the trust between the company and the supplier. Using tracking software and a good supplier management process, a company can make payments on time, and suppliers stay happy.
- Streamline Supplier Agreements:
- Streamlined Supplier Agreements (SSA) mean that all suppliers are treated equally regardless of the service they provide. The process is a lot quicker when onboarding new suppliers as the agreement will be the same for all suppliers. One can make minor edits, surely; however, these can be approved in a fraction of the time it takes to approve a 10+ page document. This makes it easier to manage relationships as there is clarity as to what the agreement looks like.
- Invest in Technology: It is easy to find the right supplier management software for a company customised to their precise needs with the ever-developing technology. With this, businesses can track suppliers, build a dashboard to have a snapshot of everything, and quickly discover pain points through simple-to-read data.
- Evaluate Risk: Businesses should research amply on suppliers before associating with them to make sure they are financially sound. Companies should always seek supplier references to inquire about particular business concerns. Asking references on how the supplier deals with increased capacity, whether they are consistent with delivery times and quality, whether the supplier is forthcoming with important information, the level of after-sales service, etc., is hugely crucial for risk management. Evaluating risk before onboarding, a supplier can mitigate uncertainties later.
We came across one of the crucial aspects of business functioning – suppliers and supplier management. More economies are elevating towards global supply now, so involving suppliers in your business processes has become a necessity. An efficient supplier management process not only helps you to get maximum outcomes for your business requirements; it also serves you a competitive edge. It’s high time your business puts the suppliers in the front seat to improve your overall organisational performance.
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