Starting Your Own Business And Multiply Your Business Profits through Supplier Evaluation

Leadership Coaching

Starting Your Own Business And Multiply Your Business Profits through Supplier Evaluation

Starting Your Own Business? You must be ready to ask probing questions about your suppliers – ones that will reveal the level of detail you need to make informed decisions, and for situations where you will be spending a substantial amount of money, or where you want to establish a long term business relationship with the supplier it is worth putting a lot of effort into your supplier evaluation.

These are some ways you can use to gather information on your suppliers:

Attending supplier events, conferences, presentations sponsored and attended by your competitors.  This will help you find out which of your competitors are either currently buying from your supplier or those who are likely to become potential and allow you to gauge the supplier’s priority.

  • Go to your suppliers’ websites to find out about any mention of your competitors, current customers or potential customers
  • Go to forums and review sites to see what you can find out about your suppliers
  • Put yourself on the mailing list and subscribe to their mailing list and newsletter.
  • Examine ways to lower overall supply cost through economies of scale amongst suppliers as well as considering the merits and de-merits of inventory and just in time strategy. (Do you buy stack and wait for customers to buy or do you buy just in time to pass on to you customers?)

Rating and Evaluating Your Suppliers

It makes no difference what business you are in, suppliers play a key role in your business’s success, so having a formalized system in place to track and evaluate supplier performance is essential to the smooth operation and profitability of your company.

Successful businesses embrace their suppliers, viewing them as partners in helping to grow the business and making sure that this is a mutually beneficial partnership that will impact the price they are negotiating now and the quality of products and services they get in future.

Establishing Performance Indicators

At the onset of the relationship with your suppliers you have to determine what characteristics they need to have, demonstrate, or maintain to continue doing business with you.

Create specific performance criteria for tracking and evaluating your suppliers on a regular basis, perhaps monthly, quarterly or annually and your considerations should include the size of their company, quality management systems, complaint history, and financial stability. You might want to consider if they have a documented procedure for the product or service they provide, and the criteria you apply will be dictated by your own processes and needs of your business.

For example, if you are a “T Shirt” digital image designer that depends on a supplier who can provide you with high quality cotton “T Shirts” you would want a supplier who can provide you with this specification, and promptly.  The success of your business will be totally dependent of this supplier.  You would want to know their delivery history, the quality of their “T Shirts” etc.

A basic consideration for every business owner should be whether the supplier has a quality management system in place. ‘This doesn’t just apply to manufacturing but any business including service providers. ‘It’s really about if the supplier has a certain set of procedures in place that its people are expected to follow.

Is there a system for handling complaints or problems?  Are there corrective or preventive actions?’ Such standards would have been addressed if they are ISO certified.

As you monitor your suppliers’ performance, you also have to decide when to praise them and when to issue a red flag, showing appreciation for a job well done, and giving them additional business because of excellent performance.

By giving a warning, you give your suppliers opportunity to correct the problems. Use data that you have collected about their on-time delivery rate, return rate, and number of their corrective actions to work with them as this process is not just about reviewing them, but helping them to improve their performance.’

Of course no one should tolerate ongoing bad service and there may come a time when you have to let go of under-performing suppliers. If your suppliers are un-responsive to your complaints, cut corners and persistently provide you with bad products and services, however cheap they might be, you will need to consider severing ties with them.

First give them a warning, call them and give them an opportunity to correct the situation, then put them on notice or a short leash before finally cutting ties completely.

Find out how to quickly grow and increase your business profits long term from our e-books;

“The 90 Day Small business Optimiser” on

If you are starting a business, you might also be interested in our “Quantum Start Up” also available on

Best of luck

Amma Radek