5 Things to Consider in a New Supplier

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The pandemic has shown that people will not stop buying, even if they are locked up within their house walls. On the contrary, ecommerce sales have boomed during 2020 and continue to inch higher even in 2021.

Many retailers have found that they need more goods that they thought when the crisis stroke a year ago and are now looking to expand their supplier’s portfolio.

With international travel restricted, distributors can use an online suppliers website such as Globartis that will make easy for them to find a long-term supplier.

Yet, although it is striking that one can find a business partner from the other side of the planet from their desk, it is important that owners and managers remember that they should always perform the appropriate due diligence when contracting a new supplier. Supplier information management is a key element to ensuring a productive relationship. 

Here are the five most important things to consider when signing up a new manufacturer.

Quality

The first is of course quality. The worst thing that can happen is that you make the first order and then when the goods arrive you find out they are severely defective. Another unpleasant surprise occurs when the quantity is not the one agreed: of course, there is a tolerance threshold, but if you ordered 1,000 pieces and you get 900, something is wrong.

 You can avoid such nasty surprises in several ways, such as asking for samples, references, or checking whether the supplier is certified according to international standards such as ISO 9001.

Manufacturing Capacity

Sometimes quality is not a problem, but the supplier is not large enough to fill your orders consistently.

This occurs when the distributor’s business grows too fast, and the supplier does not want or cannot make enough investments in its manufacturing capacity to match the increase in production.

So, before onboarding a high-quality supplier, you should also check that he has the manufacturing capacity to fill your orders. Also, it is important to check that he is willing to make the necessary investments, should these be required by an increase in business activity on your side.

Geography

We live in a globalized world, but distance still matters. If your business is extremely dynamic and you need just-in-time supplies, perhaps it is better to find a supplier established in a neighbouring country.

Another reason to look for a closely located supplier could be if you need close interaction. This may occur, for example, if you have outsourced not only production but also a part of your company’s research and development. In that case, frequent visits to the manufacturer’s premises are a must and you will be better off if the supplier is as close as possible.

On the opposite side, if you need a supplier just for a commodity-like product that is recurrent and does not need improvement, the location of the supplier is not an essential factor. It could be China, Bangladesh, Mexico, Poland, there is not much difference in this case.

Financial Position

The financial situation of the supplier is another important thing to consider. Manufacturers are by definition contractors, and the loss of just one important distributor could impinge on the viability of their business. Another situation may occur if the supplier operates with excessive financial leverage, and even a temporary loss of revenue would lead it to bankruptcy.

A bankrupt supplier is of no value to you, so checking whether the manufacturer is financially sound and can continue to carry on business without disruptions of this kind is another bullet point on your list.

Track Record

As a final check, you should also consider the track record of the supplier. How many times was the company dumped by other distributors? Was it involved in any legal claim? Of course, some are almost physiological, but if the manufacturer has been involved in litigation many times, you should see it as a red flag and think carefully on whether to proceed.

Conclusions

The pandemic has shown that, notwithstanding all the digital products that have been so trendy in the past decade (and even now), we still need companies that manufacture physical products, such as clothes, home refurbishment, and gardening tools.

It also true that technology has given the chance of sourcing products in a much more effective way compared with the past. Yet, distributors and international buyers in general should still be careful when contracting a new supplier and do the proper due diligence: it was a good idea before, and it is also now, only that it can be performed differently.