Ask the Experts: How do I choose the right suppliers?

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Ask the Experts: How do I decide what suppliers to use?
Ask the Experts: How do I decide what suppliers to use?
BigHospitality puts one reader’s question about choosing suppliers to David Read, chief executive of Prestige Purchasing

BigHospitality puts one reader’s question about choosing suppliers to David Read, chief executive of Prestige Purchasing.

Problem​: “Whenever we need to replace or upgrade things in our 30-room hotel, a big problem is always choosing the right supplier who’ll provide good solutions without charging us an arm and a leg. Often, sales people are either not interested in making an effort as we’re too small, or they’ll make unreasonable offers that our business can’t sustain. Finding suppliers ends up being far too time consuming and often damaging to our business as we don’t get the after-sales support promised (e.g. for a broken boiler). How can I choose the best suppliers without forking out for a middleman?” Anonymous.

Solution:​ This is a very common challenge faced by small to medium owner-managed businesses, but there are some simple steps you can take to reduce the pain as follows:

Plan where you look for suppliers

Professional buyers use a couple of tools to work out what kind of suppliers they should be approaching. This stops them selecting suppliers who will never be able to do the job.

The first tool is supply positioning. This looks at the product/service (category) you are buying and plots it on a grid to determine the type of relationship you want with the chosen supplier. It divides into four categories as follows:

Minimise​ – Maintain low level of buyer input, for example with outsourcing or consolidating suppliers.
Secure supply​ – Focus efforts on ensuring a high level of secure performance from suppliers. Low effort on price but high effort on selection.
Drive profit​ – High emphasis on price, using market pressures to drive lower costs.
Partner​ – High focus suppliers. Long term relationships with mutual risk/reward. Big focus on continual improvement on product performance and service.

Use this with the same process in reverse (so you get the supplier’s perspective), which is called Customer Preference Overview. This will reveal how a supplier views your account and divides into four categories as follows:

Ignore​ – Vendor will apply low quality or no resource to account development and service.
Develop​ – Vendor will try to ascertain the development potential of the account and will apply resource if proven.
Exploit​ – Vendor will seek ways of improving margin/releasing cash, and will often under-service the account unless strongly managed or given reasons to do so.
Core​ – Vendor will apply high focus with quality resource. They will try to create long term relationships with mutual risk/reward.

Attractiveness is determined by things like how easy (and low cost/effort) you are to deal with, how well you pay, if you are seen as a growing business, and the attractiveness of your brand as a reference.

So choose relationships to fit the product/service you are buying, and choose suppliers who find you attractive and see you as a growing or large account.

Alternatively join a consortium

There are a number of purchasing consortia out there who aggregate the volume of their members to achieve reduced cost, and do the hard work of tracking down and vetting new suppliers. They do charge a fee but this should be more than covered by cost savings that they generate. Be careful when making your choice to test the quality of the service they provide as some over-focus on just price, and this will not solve the problems you describe.

Do you have a problem you'd like solving? Need advice on a particular area of your business? Our panel of industry experts are on hand to give you the help you need. Email your problem to arjf@ovtubfcvgnyvgl.pb.hx with Ask the Experts in the subject line and we'll endeavour to get it answered.

Related topics: Business, Ask the Experts

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