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”.
There are five means to find new manufacturing suppliers.
Potential suppliers should be evaluated against these four criteria: Management commitment, capability, capacity, and cost control.
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.
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.