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.

Suppliers are boosting innovation in order to compete

Tuesday, September 8David Rae in Global Sourcing, Strategic Sourcing, Supplier Relationship Management, Supply Chain Management

While the global economy continues to trace an uncertain path through this economic minefield, it is perhaps worth remembering some of the positive aspects to have come out of this period of doom and gloom and a recent story reported by Procurement Leaders is a good example.

The article is about how low-cost country suppliers, faced with dwidling markets and struggling clients, are having to up their game in order to compete, not just today, but, perhaps even more importantly, when things begin to pick up.

Based on a study carried out by Spenser Au of Global Sources, low-cost country manufacturers will be significantly increasing their spend on research & development in order to compete.
"Since last year, nearly half of China's toy manufacturers have shut down. Surviving manufacturers, particularly at the low-end, are finding their margins have all but disappeared. This has led a significant number of suppliers to invest more in R&D to create differentiated products that can generate higher margins," claims Au.

And the increases in R&D are not insignificant - almost a third say that they will do so by more than 20%.

If ever there was evidence of the need to maintain close relationships with suppliers, this is it. After all when consumer and B2B spending begins to pick up, buyers will not only be looking for the best deal they will be looking for the product which will provide competitive advantage in a recovering economy.