Did you know that companies can save up to $6 million every year just by choosing their suppliers wisely? According to Deloitte, this is a real possibility, and something supply chain management (SCM) and procurement departments need to strongly work on as one of the steps to growing your bottom line.
What’s better, you don’t have to break much sweat to get maximum value from your supplier relationships. The following are a few proven tips to get you started.
- Talk to multiple suppliers
What most companies don’t realize is that suppliers, just like other businesses, compete on the basis of price. Just like you occasionally lower your prices and offer tasty coupons to appeal to more customers, suppliers are always throwing around discounts to attract more clients. It is your duty to find the supplier with the best prices. To this end, always begin by talking to at least three suppliers, letting each one know that you’re getting other quotes and that you’ll go with the supplier that offers the best price. As long as you don’t compromise quality, this strategy will always get you great value.
- Make them know that you’re in a position to give them a lot of business
Suppliers, just like you, also desire long-term customers who buy a lot of products, and are willing to go an extra mile to keep such customers on board. Therefore, when negotiating with your suppliers, make sure they know that you have the capacity and willingness to give them repeat business over the long term. It works even better if you can show them records. Let them see how much volume you’ve been buying in the past and at what frequency. This will give them a rough idea of what they can expect from you, forcing them to offer you a better deal.
- Offer large deposits to get a bigger discount
This is another trick most wholesalers don’t know about. Suppliers are concerned about their accounts receivable just like all other business owners. They want more money in the bank and fewer debts. It means that they are likely to be happier if you’re paying most of the money upfront. A good idea would be a value in the region of 50-60%. If you can pay your packaging products supplier 60% upfront for an inventory of glass jars, for instance, they will be more than grateful. And, to show their appreciation, they are likely to offer you a bigger discount.
- Consider transferring all your business to just one supplier
In most scenarios, this is usually the tipping point. When a supplier finds out that you’re now buying exclusively from their company; that as long as they have the product, you will always buy from them; the deal is sealed. You will not only get lower prices and first dibs on new arrivals, but the supplier will be more than willing to discuss even higher discounts and more favorable payment structures.
If you’re struggling with the bottom line, these are some of the adjustments you can make on the supplier-side to improve the overall profitability of the business.