Finding the right suppliers and having good relationships with them can help you give customers quality products and services at competitive prices and without interruptions.
If your suppliers are unreliable, your business could be disrupted or unable to trade.
The right suppliers will decrease the risks associated with supply chain disruptions. Having relationships with alternative suppliers can also help to mitigate these risks.
Working with various suppliers involves management skills including:
- maintaining relationships
- managing disputes.
Researching and choosing suppliers
Before choosing suppliers for your business, you should conduct some research.
You can research suppliers online, but you can also join networks or search industry databases and association websites. Reach out to contacts, friends or family for recommendations.
There are many factors to consider when researching a potential suppliers, including:
- alignment with your business values
- effect on the environment.
Some suppliers will provide additional support or service if you are starting up a new business—for example, they may offer flexible credit terms for the first few months or provide an extra discount on a trial basis.
Use this checklist to find the best suppliers for your business. It outlines key questions to ask and what to consider when researching suppliers.
Negotiating supplier contracts
Once you have chosen the suppliers for your business, you will need to negotiate supplier contracts. These contracts may have different names (e.g. supplier agreements, product supply agreements or supply and product contracts) but serve the same purpose.
A supplier contract is a written agreement that outlines the terms of trade between your business and the supplier. Negotiations and contracts are usually based around an ongoing relationship rather than a one-time purchase.
Sometimes a supplier will have their own written agreement that you can use as the basis for your contract; in other cases you will have to draft the contract. When drafting your own contract, you should refer to templated supplier contracts available on legal company websites or through industry associations.
Supplier contracts should include details on:
- products and services to be supplied
- placement of orders
- payment terms and conditions (e.g. deposit, discounts for early payments, price changes, payment options)
- delivery times and quality of the shipped product, including warranties and guarantees
- any exclusions (e.g. products are delivered but not installed)
- indemnities—the legal obligation of the supplier to provide you with compensation if any losses occur due to their actions or the actions of associated parties
- intellectual property
- grievance, disputes and termination.