Areas to be investigated in selection of a suitable supplier and major implications due to early and late deliveries in purchasing

The selection of best & suitable suppliers in each & every single purchase needs investigations in following areas:-


a) Classification of Suppliers: Suppliers can be classified into different categories such as producer, merchant, stock holder, agent, wholesaler etc., therefore decision should be taken according to supplier’s category i.e. which type of supplier will be suitable in a particular purchasing operation.

b) Storage Cost: Early deliveries mean additional cost for providing space to keep the stock. The storage cost includes the wages and salaries to supervise the store, expenses to cover the lighting, cleaning, insurance etc. It also expose to the risk of theft, deterioration and obsolescence which depend on the nature of the goods.

c) Production Delay: Procurement planning need to be made ahead to avoid any costly delay in production schedule due to late deliveries of supplies. Late deliveries effects very seriously on marketing function as well as on the morals of the workers, if they laid-off due to break in production schedule. Sometime, any disturbance in production can create industrial relations problems.

d) Increased Cost: Due to late deliveries, expensive telephone calls and frequent visits to suppliers can increase administrative cost of purchasing department.

e) Carriage Cost: Sometime buyer may be tempted to engage more costly form of transport due to late deliveries, e.g. railway may be replaced by air freight which increase the carriage cost, and decrease the profit margin.

f) Loss Of Goodwill: Late deliveries can result in loss of orders from customers and effect on the goodwill of the business.