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Purchasing
3. Supplier Relations
3.1 Put most of your effort into:
- Supplies you will spend the most on - five or ten items may account for 90 per cent of the money you spend.
- Supplies crucial to your production.
3.2 Avoid over-dependency on one supplier.
- What happens if the supplier goes bust?
- Alternative suppliers provide competition.
3.3 Give most of your orders to just a few suppliers.
- If appropriate, ask for bulk or cumulative discounts (eg if you order 5,000 units in the next year, you get a five per cent discount on all orders during that period).
3.4 Treat suppliers well and they will treat you well.
- Keep them up to date with your needs.
- Build a relationship of trust.
- Ask for their views and ideas.
- Consider establishing long-term partnerships with key suppliers. Co-operate to improve the goods and services supplied and relevant procedures and systems.
3.5 Agree in advance what will happen if the supplier's goods are faulty.
- Will the supplier replace the one faulty item or the whole batch?
- Will replacement supplies be delivered immediately, or will you get a credit note?
- Will replacement goods be free? Who will pay for delivery?
3.6 Ensure that the supplier fits in with your ordering systems.
- Will the supplier agree always to quote your order reference?
- How will you be able to avoid paying for all the goods when part of a delivery is incorrect?
3.7 Agree on payment terms.
- Payments in advance should generally be avoided, especially if you are unsure about the supplier's creditworthiness.
- Ask for a discount for early payment.
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