Monthly Archives: November 2012

Putting your Suppliers under the magnifying glass

Review your suppliers

Review your suppliers

The world economy is obviously going through some tough times at the moment. With some countries managing their debt levels, others battling recession while others are trying to turn their economies around to get some growth. So in a flat market you have worked damn hard to ensure you get and convert every available sales opportunity available: newsletter, exclusive sales, members only events, word of mouth, social media, sales leads from nepchin. In the short to medium term horizon, sales are not forecasted to increase meaning revenue is going to stay relatively flat.

If revenue is going to stay flat, then to help contribute to profit increase, then we need to reduce the cost of supply that is required to deliver the goods/services to the customer. What are some quick wins? Immediately you can start looking at the vendors who are currently supplying your business.
How many do you have?
Are they all required?
Do they provide everything you need?
Is there enough competition?
Do you have a supplier agreement or similar with them?
Do they have favourable terms for your business?
Do they give you discount for bulk purchases? Are they reducing their prices every year for the same item? or is there a reason why it isn’t?

With all these questions, it is really ensuring your vendors are current and meet your supply needs and give you value. Any vendors you have on the books and are not providing supply, you have to manage, hence cost. With no revenue increase, every penny saved is going to help give you bigger profit. So you will need to weigh up if the cost of having them meets your strategic needs.

Some of the risks of not reviewing your vendor relationship are your suppliers become lazy, take your business for granted. If your contract expires with them, what are they doing to earn your next business or are they just milking you in the short term? Where is the relationship. With many vendors, it is hard to find leverage on one or two items. To build this lever, trying grouping some items that they can supply you and then hence asking for discount. Less vendors, less management, less cost to your business. Are your suppliers going to be around in the next few months? Are you dependent on them to deliver your service? A lazy supplier to your business make you less competitive and with the current environment on the fittest and strongest will survive.

Start putting your Suppliers under the magnifying glass today and make sure your suppliers are giving you the maximum value.

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