When searching for a new supplier, there are some rudimentary questions that you must ask. These inquiries not only serve as an introduction to the manufacturer but will actually build a solid foundation for long-term cooperation.
The answers you’re given will serve as a crucial part of choosing who you should work with, the best way to work together and if your supplier will be able to take care of you in times of need.
Pricing & Payment
Do You Have A Volume Discount, And Where Are The Price Breaks?
Many suppliers offer a price break for ordering more volume. The more you buy, the more you save. Why? It’s not just about rewarding those who buy more. In fact, larger orders allow their warehouse to work in more efficiencies which saves them money. When they save money, you save money!
They key for you is going to be finding out where these price breaks are and seeing if you can take advantage of them by re-arranging or consolidating your orders.
What Will My Total Costs Be?
The total costs are the most important price you’re doing to get. That’s what actually matters to your business– it’s the amount of money that will come out of your pocket. A product can be really competitively priced, but if you have to add in an astronomically high shipping rate, your costs are not all that cheap anymore.
Ask for an FOB cost at their dock, and then get an estimate for the shipping. Also, once in a while, some suppliers will have extra fees for things like pallets, packaging, labels, or handling fees. Make sure you ask for the total cost of a potential order and get all of these “extras” out in the open before you place your order.
Once you put all those numbers together, you should be good to go!
Under What Circumstances Will My Prices Change?
Some products have prices that stay the same for years. Other items have prices that are always changing because the products are commodities. In this case, you can expect that your rates will change over time– but exactly how often though? That depends on the product, how much you buy, and the market.
Talk to your supplier about what kinds of market changes will make your price go up or down. Ask them as many questions as possible to learn about the commodity market for your product, so you know what kinds of fluctuations you can expect.
What Are My Payment Terms?
Many industrial or business suppliers offer credit terms if you qualify. These terms may be 15, 30 or 60 days depending on the standard in your industry. This means that, for up to a particular dollar amount, you will be billed for what you ordered and you’ll get to pay later. For example, if you have terms of “$50,000, Net 15“, this means that you have 15 days to pay for your order after it ships. However, your order will have to be under $50,000, or if it isn’t, you’ll have to prepay some of that cost.
Other suppliers may require cash on delivery (COD), or pre-payment with a check, wire transfer or credit card before you order. Just have that conversation from the get-go so you know what you can expect and when you’ll have to pay.
Product & Production
Do You Have A Minimum Order?
Most suppliers have a minimum order. Depending on the industry that your supplier serves, it could be one case, one pallet or one truckload. As a buyer, you’ll need to know what their minimums are to understand if:
- you’re working with the right type of supplier for your type of business, and
- to make sure you order enough in the future.
These minimum orders are put in place because of efficiency reasons for your manufacturers’ own warehouse. For example, if it takes them one hour to set up their production line, they’re not going to want to fill just one case in that time before they shut it down again.
These minimums help them keep their prices as competitive as possible for you.
Do you have any evidence of the quality of your processes and/or products?
When a supplier is truly committed to high standards of quality, they are usually able to show you evidence – for example through certificates of quality initiatives such as ISO 9001.
Do you have the capacity to meet our requirements? How fast can you respond to changes in demand?
Make sure that the supplier’s capabilities are aligned with your needs. A supplier must have ample resource and control over its procedures to quickly react to new requirements whilst keeping lead times down to a minimum.
What processes do you have in place to ensure consistency of quality/meeting deadlines?
A supplier that takes quality control and meeting deadlines seriously will have processes in place to ensure this. They may also offer discounts for late deliveries/refunds or for undelivered stock – ask what these are before entering into a contract with them.
What Is Your Full Product Line?
Many times, you may be so focused on the product that you’re desperate to source that you may not think about other products this supplier would be able to help you out with until later. Perhaps they offer different items that your R&D team has been working on, or they could stand in as an alternative supplier for a different category in times of need.
It’s a good practice to always ask for their full product line when you begin conversations, so that you can keep it on hand. Do a quick review to see if there are any other products that you should ask for quotes on in the future.
Do you understand our business?
The fastest way to find out if a supplier can meet your needs is to make sure they understand you. Ideally, the supplier will have previous experience with similar businesses to you and will be able to demonstrate knowledge of the relevant technologies and issues affecting your business.
Do you have any references from former clients?
One way to establish a prospective supplier’s competency is to speak to the people who deal, or dealt, with them directly. Can the supplier provide you with references from other customers? Find out what problems they faced – were deliveries timely, and audits clean?
When Do I Take Ownership Of This Product?
Some suppliers have you take ownership when the product leaves their docks. Other times, you don’t take ownership until it delivers at your door.
The easiest way to tell is to ask your supplier what the FOB point is. The FOB point is the point where the ownership of the product transfers. If it’s FOB your supplier, you take ownership of the product when it leaves their doors. If it’s FOB your warehouse, it’s their responsibility until it safely arrives to you. Different industries have different standards.
Can You Give Me A Liability Insurance Certificate?
Any industrial supplier should be able to provide you with a liability insurance certificate. This insurance is something that can protect your business in the event that there is a product recall or other issue. It’s important that you get proof of insurance from any supplier, in every industry you buy from.
Make sure that the limits are adequate to meet your needs. Also, ask for an updated copy each year.
What are your ethical credentials?
As soon as a supplier enters into your supply chain, its ethical credentials become an extension of your own, and you become complicit in – and answerable for – its ethical conduct. Is the supplier committed to environmental sustainability and ethical compliance? Can it provide you with audit results from an external party? Will it agree to an initial audit from you, and regular audits during the contract?
Are you in good financial health?
Suppliers that can demonstrate on-going financial strength are a far safer bet for a long-term relationship. Suppliers who are financially secure are more likely to survive a rocky economy.
What’s your approach towards communication?
Find out who your main point of contact will be, and how regularly you can expect to be in contact with them. What’s the supplier’s communications strategy in the event of supply chain disruption or a major crisis – how will they notify you and keep you up to date on developments? If you won’t have a singular point of contact, ask about their customer service – is it both proactive and reactive?