How To Find New Suppliers

Finding new suppliers is no easy task. It can be both risky and costly. Companies need to take into consideration all sorts of external and internal factors as a result. Regardless, finding new suppliers is new and old companies must at some point or another find new suppliers.  The recent supply chain shakeups have only made finding new suppliers all the more important.

To minimise risks and long-term costs, companies often seek help from specialists in the field. It all depends on your needs and your company’s needs. We at Kusu always aim to tailor our services and our expertise in Southeast Asian manufacturing to you and your company’s needs. In this week’s article, we will be going over how the general conto find new suppliers. 

More specifically we will be going over: 1) How to find new suppliers; 2) How to evaluate potential new suppliers; 3) The pros and cons of “direct purchasing” versus “trading agents”.

How to Find New Suppliers

There are five means to find new manufacturing suppliers. 

• The first means involve the internet. This means is most useful at the start of you and your company’s search, helping you explore, understand the market, and create an initial shortlist. 
• This leads to the second means: trade publications. Where the internet can offer a basic understanding of the market, trade publications offer a more specific view of a specific market/trade, helping narrow down the shortlist in accordance with trade requirements, trends, etc. 
• LinkedIn, the third means, is a similar means to trade publications, offering specific market/trade insights though through a more personal lens.
• The fourth means involve trade shows and conferences. Trade shows and conferences are a great way to meet with suppliers, and are the most direct method to approach your company’s shortlist of potential new suppliers. Some of the biggest manufacturing trade shows in the US are the International Manufacturing Technology Show, FABTECH, etc. Some of the biggest trade shows in Southeast Asia include the International Conference on Manufacturing Technologies, SEMICON Southeast Asia, etc.
• The final means, trading companies, companies that buy and sell products and supplies, combine aspects of the aforementioned means. Trading companies will be further discussed down below.

How to Evaluate Potential New Suppliers

Potential suppliers should be evaluated against these four criteria: Management commitment, capability, capacity, and cost control. 

1. Management commitment refers to “Management commitment, including the endorsement and visible involvement of top management, provides the motivation and resources to deal effectively with workplace violence,” according to the CDC.
2. Capability refers to whether or not the suppliers are able to supply the products you require to begin with and/or whether or not suppliers operate in similar markets, whereas quality refers to the calibre of the products supplied; whether the products meet your designs, specifications, and/or standards. 
3. Capacity refers to the level of output or the number of products suppliers can supply. You and your company will receive a certain amount of orders and the supplier must be able to provide the necessary product or goods at a specific time to meet said orders on time.
4. Lastly, cost control refers to suppliers’ ability to minimise financial costs (ensuring you get the best value for your money possible). Suppliers can do this through clever selection of their own sub-suppliers, an innovative and efficient production model, careful financial management, etc.

“Direct Purchase versus “ Trading Agents”

LinkedIn defines direct purchases as “the act of acquiring raw materials and goods for production. These purchases are generally made in large quantities, acquired from a pool of suppliers at the best possible cost, quality and reliability.”

Direct purchases eliminate the need for a middleman and allow for direct lines of communication between you and your supplier. This helps limit costs/retain more of your profit as no commissions have to be paid to any middlemen or “trading agents.”

On the other hand, where direct purchases allow for greater directness, trading agents offer more options. They can therefore allow your company options to source goods from, an understanding of the market, and allow you and your company to connect with new suppliers as well as offer specific technical and logistics support.

This is due to trading companies’ pre-existing and long-standing relationships with vendors. The wide variety of options and vendors ensures that economies of scale exist, and you are likely to benefit from the economies of scale in such a scenario. However, this obviously comes at a cost. Moreover, adding a middleman adds additional strain to your supply chain and your operations.

What It Means For You

While companies’ approaches to finding suppliers may vary company-to-company, the key factors to consider are generally consistent. However, figuring out which factors to prioritise depends entirely on your company’s current circumstances.