What does a potential supplier look like?

It is useful to have a view of what the whole supply market has to offer before making the final selection of supplier.

The more unique and complex the specification the more unlikely it is that any one supplier will be able to satisfy the requirements fully. Gaining a broad appreciation of the differences in offerings and values available in the supply market assists us in matching these to our needs and values and their relative importance as defined in our purchasing specification. The McDonalds initiative to buy local produce may have advantages in total cost and quality but would also appeal to consumers valuing sustainability and support of the local economy.

The level of understanding required links directly to the extensiveness of the buying specification and the complexity and uniqueness of the product. For example, when purchasing a commodity where there is little differentiation the choice often comes down to minor differences in price, quality and service levels. However, at the other end of the spectrum, complex tailored items may require close collaboration with a supplier. Suppliers competing in these markets may have marked differences in their competences and skills, product and manufacturing technologies, supply chain structures and service offerings all of which would affect their ability to meet individual components of the buying specification.

Applying our specification to the supply market may also highlight differences in the power dynamics. When forming a view of a potential supplier or a particular segment of the supply market it is imperative to understand where the relative power sits, how this is perceived by both parties and specifically to what the power relates to.

As a customer you may think that buying in volume might be an attractive proposition for a supplier so that they may offer an attractive discount. However, the level of attractiveness that this proposition offers may be very different from one supplier, where the offer constitutes a large proportion of their business, with one where, perhaps, the volume on offer is much less than one of its standard orders from one of its much larger customers. The bases of what each party in the potential relationship values most is key both in not only developing the best profile of potential suppliers but also as to how the relationship might function (i.e. the terms upon which the relationship is founded).

Additionally gaining an initial view of the supply market landscape can sometimes assist us in the development of the buying specification as we may learn of products, product features or service offerings of which we were previously unaware.

Talking point

  • How would your approach differ to understanding the supply market for a simple low cost item vs. a high cost complex or bespoke item? Consider, for example, how much effort would you expend, and what range of topics or issues would you want to understand?

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This article is from the free online course:

Supply Chains in Practice: How Things Get to You

The University of Warwick