There’s
nothing more frustrating than to get an order from a client that you cannot
fill. Not only do you lose the revenue from the order, you also run the risk
that the customer will start doing business with a competitor. If you can’t
deliver a product or service when the client shows up, you may lose all future
business to the guy down the street.
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The importance of suppliers
Having
reliable suppliers is critically important to a business. If you manage a
retail clothing shop, for example, you need quality products that your clients
want to buy. You need a supplier who can provide the right styles, sizes and
colors.
The supplier
needs to provide the quantity of product you need- when you need it. Finally, the
price you pay should be reasonable.
If you make a
product, you may use suppliers to provide components for your product. A shoe
manufacturer needs a leather supplier, for example. The same factors apply to a
manufacturer. You need the supplier to deliver a quality product on time, and at a
reasonable price.
When the product drives the business
In some cases,
a few specific products drive sales for the rest of your business. We’ve all
seen, for example, a display of shovels and rock salt at the grocery store
before a snow storm. The grocery store hopes that you’ll come into the store
because you really need a shovel. While you’re there, you’ll remember that you
need bread and milk.
The shovels
might even be priced as a loss leader. The store may sell the shovel at a loss,
hoping that you’ll come into the store to buy other products- products that are
sold at a recent profit margin.
Which brings
us to Taylor Swift.
Taking a big bite of the Apple
As TimeMagazine explains:
“Apple announced on June 8 that
it would launch its own streaming music service…. But its launch would come
with three free trial months of service—months during which it would not
compensate labels for the music it streamed.”
Once Taylor Swift protested that she was not
going to be paid royalties during the three-month trial period, Apple backed
down and agreed to pay the fees. Taylor Swift is not only a big draw to users
of the music service- she also has influence over other artists. The supplier (Taylor
Swift) is driving the business (streaming
music service).
Managing suppliers
In the case of Taylor Swift, the
customer demand for the product outweighs the price paid for the product
(royalties). In other instances, you may determine that more than one supplier
can provide the product to you.
A common mistake in business is
to “chase” the supplier who offers a cheaper price. There are other
considerations besides price:
· Quality: If the product has defects, it will
slow a manufacturer’s production process. If you’re a retailer, you don’t want
to sell a defective product that you stock in inventory.
· Timing:
As mentioned above, a
supplier must be able to ship you product when you need it. If not, you may
lose business. Paying 10% less doesn’t do you any good if the product is
shipped late.
· Variety
of Product: A big issue
for many businesses is using too many suppliers. One way to address this issue
is to find suppliers that offer many of the products you need- one stop
shopping for you. If your supplier can meet this requirement, you might be
willing to pay more.
Consider all of these factors
when looking for suppliers. Meeting the needs to your customers is about more
than just price. By using these tips, you can meet your client’s needs and grow
your business.
Have you dealt with a difficult
supplier situation? I’d love to hear from you.
Ken Boyd
St. Louis Test Preparation
Author: Cost Accounting for Dummies, Accounting
All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
Co-Founder: accountinged.com
(amazon author page)
amazon.com/author/kenboyd
(cell) (314) 913-6529
Image: Spark CBC,
microphone, (CC By SA-2.0)
