The reliability of your supplier is crucial. While a competitive price is also important, make sure that low prices don’t come with unacceptable compromises on quality or on the level of service you will receive.
The main stages in the supplier-selection process are:
Drawing up a shortlist of potential suppliers
Comparing the shortlisted suppliers on the basis of value for money, reliability and creditworthiness
Visiting the suppliers, if possible, to see their operations
Deciding which of the suppliers to work with
Value for money from suppliers
Make sure that you’re happy with the price, quality and terms the supplier is offering. Get a written quotation. Any quotation should clearly state the terms of sale – i.e. how the shipping, insurance and associated transportation costs and duty are to be allocated between you and the supplier.
Ask for a sample based on your specification to make sure the supplier is capable of producing what you need.
It’s important to research supplier reliability. If possible, visit the supplier. Look at their work and their production system.
Find out as much as you can about the supplier. Talk to:
Any western references the supplier can give you
Importers with experience in the market
Trade associations and other importers in your sector
You should also check the reliability of any sub-contractors to which your supplier may be outsourcing work.
Financial checks of overseas suppliers can be difficult due to a lack of accessible financial information. See if your bank’s international trade team can carry out a status query – a query into the company’s financial standing on your behalf.
Be cautious. Avoid advance payment or long-term contracts until you trust the supplier.
Build solid relationships with overseas suppliers
Trust is a crucial element of any supplier relationship. While it can take time and planning to build a solid relationship with overseas suppliers, doing so makes it more likely that you will increase business with them. It may even enable you to negotiate more favorable terms.
Build trust gradually with suppliers
The key is to build the trading relationship slowly. Initially you should leave nothing to chance. Draw up written contracts that are clear and unambiguous. See overseas supplier contracts.
Typically, your initial contracts with a new supplier will be on a project-by-project or shipment-by-shipment basis. As the relationship develops you may move to longer contract periods and potentially be able to negotiate better terms.
An important part of building trust is learning how things work in your supplier’s country. Are there important cultural and social differences, or differences in the way business is done? See entering overseas markets.
Communication is an obvious potential obstacle when dealing with overseas suppliers. Even simple actions such as language barriers, routine telephone calls can be complicated by factors such as time differences and low-quality phone connections.
Face-to-face meetings are likely to be infrequent, but they can be vital to the trust-building process – so plan them carefully.
In addition, there are potential language barriers. Which language will you use with your supplier? Do you have enough foreign-language speakers in your workforce? Do these employees have the skills they’ll need to deal with your suppliers? Would it help to use local interpreters, especially for key meetings, to avoid misunderstandings?
Monitor, review and adapt your supplier relationship
Make sure you monitor key aspects of the new supplier relationship. This will make it easy to identify areas for possible improvement.
Schedule progress reviews with the supplier. If there have been any problems, decide together how to resolve them. If everything has been working smoothly and profitably, you may want to extend the level of business you’re doing together.