Supply chain · 14 September 2015

Five things you need to ask of suppliers before buying from them

Don't put pen to paper unless you've thoroughly vetted a new supplier
Don’t put pen to paper unless you’ve thoroughly vetted a new supplier
Our sourcing suppliers expert outlines the critical questionsto put to any potential supplier, before putting pen to paper.

Selecting new suppliers for your business is something that should be done with diligence and care, but often it’s easier said than done. I’ve pulled together some key questions to ask suppliers so as a micro business, you can put yourself in the best position possible from an early stage.

(1)what can you do for us?

This is absolutely crucial. You need to know that suppliers can do exactly what you need them to do for your business. So, it’s critical that you define your requirements very clearly, explain them well to potential suppliers and then ask them to clearly demonstrate they can do what you want.

(2) Where else do you provide this product/service?

it’s important to know about suppliers’ track records. Establish what other customers they have; what they do for those customers and how satisfied their customers are. And don’t be afraid to ask for references. You can discover a lot about a supplier by talking to anexisting customer base. Of course you can ask them to put you in touch with some customers to find out about their experience. Whilst that will give you some level of comfort, you should ask some of thosethat the supplier doesnt put you in touch with. Only then will you get a real sense of the quality of their service and how easy they are to work with.

(3)how will you improve my business?

You wouldnt employ a new member of staff and not expect to see them add value to your organisation. The same is true of suppliers. You want to ask them to be specific about the improvements they will make for example they may supply an enhanced service or product that will enable you to better serve your customers. Theymay provide a product or service that reduces your bottom line or if they don’t reduce your costs, they may make your costs more predictable.

(4) Is your business viable?

You need to ensure you ask the right questions about the supplier’s ability to operate, and importantly you need to continue to ask these questions throughout the duration of any contract with a chosen supplier.

Viability covers a number of elements:

Financial stability Does the supplier make money? Does it have a healthy balance sheet? Health cash flow? How much debt is it carrying?

Operational infrastructure Can the supplier meet the demand you are proposing to place on it as well as the demand it already has from its customer base?


 
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ABOUT THE EXPERT

Simon Dixon is the managing director of supply chain and logistics advisors Hatmill. He has worked in supply chain management for the past 19 years, both in industry and in consultancy. Simon's client experience includes the top four UK supermarkets and over 50 other clients spanning sectors such as construction and ecommerce.

Supply chain