During my manufacturing career, I can’t tell you how many managers told me “price is all that matters.” While this statement might hold true in some cases, don’t let that mentality drive your decision-making when you are looking for a supplier or vendor.
First, let’s discuss the difference between a supplier and a vendor. The truth is, both provide services or goods, and I use the two terms interchangeably within the B2B world.
When looking for new suppliers, there are a few steps you should take before you start calling or paying invoices.
Now that all potential suppliers understand your requirements, quantities needed, and delivery information, you are ready to get quotes from each supplier.
Once you have the quotes, make sure you are doing an apples-to–apples comparison. If details are omitted or differ from what you requested, make sure to follow up and ask why. If there are large changes or deviations, get your engineers involved before agreeing to changes. The end customer will call you if there are issues, so make sure you understand exactly what your supplier is quoting you.
Now, it is time to make a final decision.
If one supplier is much less expensive than the others, ask yourself why. There could be good reasons for the cost difference. For instance, if one company specializes in making the parts you need, they might have a better cost structure and processes and pass those savings on to you. It also could be that they cut costs by excluding packaging, utilizing a different shipping service, or even using inferior materials.
Consider asking potential suppliers to make a few sample parts for you. You may have to pay for the samples, but it can help you do a fair comparison.
Once you have selected your supplier, make sure you ask some additional questions. If your orders go up, can they meet higher demand, and how will they handle it? If you have specification changes, how do they adjust price? Do they have a disaster contingency plan in place in case anything major happens at their facility? How can they ensure you continue receiving parts?
Next, discuss payment and discounts options, guaranteed order numbers, and larger forecasted quantities. At this point, you could ask to visit the supplier’s operation, depending what you need from them.
These steps should help you decide on the right supplier.
Before moving on, you have one more task. Set up a backup supplier, so you have an alternative ready to go if you run into any problems, such as quality issues, a recall from your supplier, a disaster they cannot deal with, or an increase in your demand.
If prices were the only driver, we would all buy the least expensive product, but that isn’t what happens. When we buy a product, we are buying more than just material or components—we are also buying the reputation, service, warranty, customer service, and much more. So, don’t let price be the only factor when selecting a supplier or vendor.