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.