Choosing the right manufacturing suppliers that best suit your company’s needs and that become an ally for your organization to achieve its goals is a decision that must be taken seriously.
Determining why specific supplier companies are the ones that suit you best is something that requires significant time, resources, and careful analysis.
We can consider many factors, such as the type of supplier and whether or not they are manufacturing suppliers for our operation.
Sometimes executives select a provider because it is located nearby or because of a known party’s recommendation. However, companies must keep in mind that the success or failure of their efforts and strategies will ultimately have a lot to do with the quality of suppliers they choose to do business with.
It is worth noting that there are multiple factors to consider when selecting manufacturing suppliers. For this reason, we propose a series of essential factors that companies must consider when preparing to embark on a relationship with a new provider below:
- Look for various options. Companies should collect information from multiple candidates. For a specific purchase, a company may need to consider doing business with more than one. Under any circumstance, it is usually the best strategy not to have all the eggs in the same basket. Those researching manufacturing suppliers should conduct a market survey, analyze several alternatives, and choose the best ones as they present themselves.
- Find out in a timely manner. It is assumed that candidates for becoming a manufacturing supplier, when participating in a selection or bidding process, carefully structure the documentation that they deliver to their potential contractor. The reality, however, is that sometimes this expectation remains a mere theory.
It is crucial to add practical elements to the evaluation related to the performance of the potential supplier company. This class of information can be obtained through references from other clients; having their opinion expressed verbally can be helpful in the selection process.
Additionally, you can access information that is often found online. For example, the clients of potential suppliers have likely taken the opportunity to comment on their satisfaction or dissatisfaction. Information of this sort will serve as additional input for decision-making.
Visiting candidates’ facilities is another activity that will give you valuable information about possible manufacturing suppliers. Analyze their delivery times, rates, financing or payment facilities, and discount for prompt payment. Also, check if there is a surcharge for late payment, quality of product, guarantee, after-sales service, and return policy.
Depending on a company’s needs, it will focus more on some issues and less on others.
- Try not to be the first customer. Sometimes, recently established manufacturing suppliers offer their products or services with desirable promotional pricing. Despite the real possibility of economizing, it is risky for a company to subject itself to the experience of being a guinea pig. If it is attractive and beneficial to select supplier ‘X,’ even if the company has just started its business and you are its first client, you must be clear about the risk involved in being with someone new to the market.
- Don’t get pigeonholed by price. The price of the product or service is definitely a variable that influences the choice of provider. However, it should not be the only element that potential customers should analyze. Buyers can even negotiate prices, or the purchaser can negotiate significant discounts if high volumes are purchased. Companies seeking superior suppliers must be very attentive to other concerns that are no less important. These include considerations such as the manufacturing supplier company’s quality, experience, stability, and consistency. Keep in mind that the products or services that this company sells to its customers will influence their customers’ satisfaction, who are not willing to tolerate bad experiences.
- Analyze the size of the supplier. Make sure that manufacturing suppliers are not so big that they do not value your business, nor so small that they do not have sufficient capacity to serve you on time. In many cases, selecting a small or medium-sized company is healthy so the buyer can negotiate and obtain win-win results.
Try not to consider that supplier that, due to its extensive size, has a power that forces you to make purchasing decisions to the detriment of your business. Remember that, with suppliers that are large companies, buyers will have low bargaining power. In some instances, it could even be that they consider a purchasing company as a client of little importance. This is true of manufacturing suppliers with other clients who make a greater volume of purchases. As a result, these companies generate a higher impact on their billing.
- Assess whether the potential supplier has a Code of Ethics. Generally, large companies have a Code of Conduct or Code of Ethics; however, it does not hurt to inquire about whether the company you want as a supplier has such a document. You might be surprised to find that many small businesses possess such documents.
If a company identifies that a potential supplier is governed by integrity policies or a Code of Conduct, value it since this is a commitment that it presents with the execution of commercial activities with ethics and transparency. Through the document, the supplier communicates to its partners, workers, and the external buyer company a message about the ethical guidelines that will govern all parties if a business relationship is to be established.
On another level, if a company selects a manufacturing supplier that does not have a Code of Ethics, share yours with them and have the supplier commit to complying with it. Again, this will safeguard your interests and will be a safeguard for productive and lasting relationships.
The fundamental thing to bear in mind is that the manufacturing suppliers that become part of a company’s value chain must share, in a general sense, the same values that move the buyer’s organization.
- Put it to the test. Ask manufacturing suppliers to implement pilot tests for a short period or require a sample of their product or service for a limited period. During that time, you will be able to evaluate the supplier’s punctuality, quality, and service orientation.
Additionally, you will be able to verify the supplier’s capacity for innovation to meet your needs and their willingness and ability to incorporate Lean tools, optimize processes to reduce their response times, and evaluate their desire to improve continuously.
The opportunity to test a potential provider will be the final and determining step that will lead supply chain decision-makers to select or discard it. Never think that a test will be a waste of time. Of course, you won’t be testing all your vendor candidates, only the shortlisted ones.
Remember that the idea is to think of your manufacturing suppliers as strategic allies of your company in the long term. That is why it is important to select them carefully and, during their work with you, to maintain good communication, compliance with agreements, and monitoring of needs in both ways. In short, it is essential always to have a good and meaningful relationship.