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 on:

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.

  • Manufacturers: 

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.

Distributors

Also known as wholesalers, brokers, or jobbers, distributors buy in high quantity 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.

Independent craftspeople

Exclusive distribution of unique creations is frequently offered by independent craftspeople, who sell through reps or at trade shows.

Import sources

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

The role of a supplier in a business can be challenging at times. 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. Due to this, a business supplier must be flexible and should understand how to manage relationships. More essential elements of a supplier’s role include:

  • The 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?

We know that building a good supplier relationship is vital for sales and business. But what’s more important than this? It’s the maintenance and management of good supplier relations.

With the increase in the market saturation, volatility, uncertainty, and the impact of changes and pandemics, it becomes significant for the manufacturers to think about managing and maintaining their supplier relations.

So to undertake the activities, there is a term known as Supplier Relationship Management that fulfills the objective.

5. What Are the Benefits of Supplier Relationship Management?

Benefits of Supplier Relationship Managementis a systematic and structured approach to manage the suppliers efficiently and effectively. It is important to manage these relationships so a business can ensure the efficient supply of products and services for the company.

In other words, SRM guides you on the path to maintain and manage healthy relations with your suppliers in terms of vendor data, life-cycle management, hierarchies, risks associated, performance and compliance.

Basically, a good SRM is always a priority for businesses and manufacturers.

6. Supplier Relationship Management Best Practices

  • Build Lasting Relationships: If a company intends to use a vendor more than once it should strive to build a lasting relationship whereby they can pick up the phone and talk to their supplier easily. This relationship will ensure that they will understand the full capabilities of their suppliers so the business knows when they are asking too much from their suppliers. Building a strong 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. Some companies poorly track deliveries and orders meaning that payments may be late. This leaves the supplier in a bad spot as their cash flow is not secure and they may not trust this existing customer as much as a new customer they acquire. Using tracking software and a good supplier management process, a company can ensure that payments are made on time and suppliers remain happy.
  • Streamline Supplier Agreements: Streamlined Supplier Agreements (SSA) mean that all suppliers receive the same treatment regardless of what service they provide. When onboarding new suppliers the process is a lot quicker as the agreement will be the same for all suppliers. Minor edits can be made of course, but these can be signed off in a fraction of the time it takes to get signed off on a 10+ page document. This makes it easier to manage relationships as everyone in the department will know what the agreement looks like.
  • Invest in Technology: With software for everything today it is easy to find the right supplier management software for a company that is tailored to their explicit needs. With this technology, companies can track suppliers, create a dashboard to have a snapshot of how everything is doing, and quickly discover pain points through simple-to-read data.
  • Evaluate Risk: Companies should research suppliers before they do business with them to make sure they are financially stable. Businesses should always seek supplier references to inquire about particular concerns the business may have. Asking references how the supplier deals with increased capacity, are they consistent with delivery times and quality, is the supplier forthcoming with important information, the level of after sales service, etc. is hugely important 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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