How to Choose a Supplier in a Volatile Market

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That is precisely why yesterday’s question, ‘How do you find a good supplier?’, is gradually giving way to another: ‘How can you ensure that problems with one supplier do not bring the whole business to a standstill?’

 

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Dependence on suppliers is a risk that is rarely acknowledged

Dependence on a supplier can be financial, technical or geographical, or it may relate to something that is difficult to replace. More often than not, the realisation of this dependence comes suddenly. A supplier changes the terms and conditions, extends production lead times or temporarily halts production, and the business suddenly finds that there are virtually no alternatives.

 

Replacing a supplier can be difficult due to the unique nature of the products they manufacture or the technology they use. Sometimes quality and certification requirements stand in the way of a replacement, whilst at other times it proves impossible to find an equivalent alternative, according to experts at HLTS.

 

It is therefore essential to vet suppliers in advance and assess them in two respects: the extent to which the business depends on them and how difficult it would be to replace them. Suppliers of individual items and suppliers of consumables require different levels of scrutiny. Such an assessment provides an understanding of which suppliers are easy to replace, and with which ones it will be necessary to conduct a separate negotiation process and always seek an alternative, even if one is not needed at present.

 

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Traditional supplier assessment no longer provides the full picture

Until recently, companies assessed suppliers against quite straightforward criteria: financial stability, production capacity, quality certificates, experience and customer references.

 

These indicators remain important, but today they answer only one question: is the supplier capable of fulfilling the order? When assessing the potential of a prospective supplier, it is important to look not only at their production capabilities, but also at how they operate in non-standard situations: how quickly they communicate changes, explain the reasons behind them and propose solutions.

 

Predictability is increasingly becoming just as important a factor as price or production capacity, as experts at HLTS South Korea emphasise.

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Predictability begins long before the first delivery

In the real world of business, it is impossible to completely rule out delays, price fluctuations or other external factors. However, it is important that the supplier does not create additional uncertainty themselves.

 

Predictability starts with a simple question: what happens if things don’t go to plan?

 

Experienced suppliers rarely promise the impossible. Ask them to explain why a particular lead time is considered standard. What makes up the price? What factors might affect it in a month’s time? What counts as an exceptional situation, and how does the workflow change in such cases?

 

Experts at HLTS Ltd advise that it is useful to pay attention not only to the answers, but also to the questions the supplier asks. If a company asks detailed questions about the specifics of your business, the seasonality of sales, and your requirements for packaging, logistics and document flow, it is trying to minimise the risk of errors even before the contract is signed.

 

A supplier who is interested solely in the order volume and payment method is most often thinking only within the framework of that specific transaction.

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How to check a supplier before the first delivery

Nowadays, a supplier’s value is determined not by the absence of problems, but by how predictable our relationship with them is. Such a supplier does not promise the lowest price, but is able to explain how their price is calculated and what will happen if external conditions change. They operate according to clear rules. And these rules can be checked even before the first transaction, according to experts at HLTS company.

• Digital footprint

The company’s history, website, mentions, reviews, staff, participation in industry events, and certifications - all of this helps to understand whether there is a real business behind the polished presentation. What production facilities are used? What experience does the company have? How consistently does it operate, and can it fulfil its obligations if order volumes change?

• Behaviour during negotiations

What questions does the supplier ask? How detailed are their answers? Do they use specific figures, or do they limit themselves to general promises?

• Trial delivery.

A small initial order reveals more than lengthy negotiations. It is important to assess not only the goods, but also the entire communication process: response times, the accuracy of documentation, adherence to deadlines and how they handle any issues that arise. Dropshipping is often seen merely as a way to start selling without your own warehouse. But it is also a useful tool for testing.

• Analysis and monitoring

Tools for analysing and quickly vetting business partners, as well as monitoring their reputation, can be found on the Halla Systems Co. Ltd. website.