There are so many levels and parties in a typical supply chain. Some parties play major roles, while others play minor roles. One of the most vital parties is the supplier. A supply chain won’t be complete without a supplier. So, what is a supplier in business?
This article explores this business concept in detail.
Meaning of Supplier in Business – What is a Supplier in Business
Supplier refers to a business or person offering a particular service and/or product to another business entity.
Generally, suppliers are responsible for offering high-quality services/products to their customers.
The supplier typically buys goods from the manufacturer (at a lower price) and then supplies those goods to distributors and retailers for them to resell.
So, you could think of suppliers as the middle-man between distributors/retailers and manufacturers.
Their role is to ensure the proper flow of stock between both parties.
Suppliers can also supply materials to manufacturing companies that would use them to produce their goods or services.
Importance of Suppliers – What is a Supplier in Business
Suppliers are one of the most important parties in a supply chain.
But what makes them so important?
Well, the truth is that the absence of a supplier would cause a strain on the supply chain.
As retailers and manufacturers would have to interact directly, this may not be sustainable.
Suppliers are also very important in every phase of a product lifecycle.
They source raw materials that manufacturing companies use to produce their goods.
If the market becomes saturated, the supplier also looks for better material alternatives.
Suppliers communicate directly with the manufacturers.
So their knowledge of the market is broad.
They have better market insights and can provide the best suggestions to businesses.
Suppliers can also help a company get a competitive edge over its competitors.
They can help you be better than your competitors in terms of price and quality of your products.
If your suppliers offer you the best quality products at a great price, you can, in turn, offer your customers high-quality products at a lower price than what your competitors offer.
A company that wants the best materials to create high-quality products will have to work well with its supplier.
Finally, suppliers can also help companies to manage their finances better.
If your company is going through some financial issues, your supplier can help you maintain your processes despite your issues.
This is as long as you have a good relationship with them.
They could offer you a better contract term, increase the payment duration, or even invest in your business.
This is why businesses need to maintain a good relationship with their supplier(s).
Roles of Suppliers – What is a Supplier in Business
Suppliers play several roles in business.
These roles can be quite demanding, due to how important they are to the supply chain.
They have to provide their customers with the best quality products.
Manufacturers also expect them to sell as many goods as possible.
This means they have to appeal to not just one but two parties.
These are the major roles of suppliers.
However, besides these major roles, suppliers also have several other responsibilities.
Let’s look at some of them below.
Providing Best Prices
Suppliers are responsible for providing not just the best quality but also the best prices for their customers (distributors/retailers).
Since they have direct communication with the manufacturers, this should not be difficult for them to do.
This is the best way to build trust and loyalty with their suppliers.
It will ensure that these businesses do business with them again when they need their services.
Suppliers must offer equal transactions and opportunities for everyone they do business with.
They should also offer the same prices and services to anybody they do business with.
Have to Abide By Local Laws
Suppliers have to abide by the local laws and every other law, regulation, and standard within their industry.
Good Relationship with Manufacturers and Distributors/Retailers
Suppliers must maintain good relationships with businesses and manufacturers alike.
They need to be honest in their interactions with these people.
If a supplier isn’t able to deliver on order, they should avoid engaging themselves with it.
They should also avoid conflicts and work peacefully with everyone they work with.
Supplier Relationship Management – What is a Supplier in Business
One of the most important roles of suppliers is to maintain a good relationship with those they work with.
However, maintaining a good relationship should not be on just the part of the suppliers.
Both parties have to work together to ensure they work together peacefully.
This means that businesses also have to maintain a good relationship with their suppliers.
This is where supplier relationship management comes in.
But what does this term mean?
Well, supplier relationship management is how businesses manage and plan their relationships with the suppliers they do business with.
Regardless of what the supplier supplies to the company, they must treat them respectfully and avoid conflict.
Managing the relationships with your suppliers properly will ensure you have an efficient flow of supply from them.
This is why you need to create a good supplier management plan outlining the best ways to manage and deal with suppliers.
This plan should typically go beyond selecting the right supplier.
It should also cover developing a great relationship with them and making them trust your business.
Supplier Relationship Management Benefits
Why should you bother to maintain a good relationship with your suppliers?
Well, there are so many benefits your business stands to gain from forming a good relationship with your suppliers.
Let’s look at these benefits below.
When suppliers and companies work together closely, they would comfortably share feedback and insights.
This could lead to innovative ideas to help both parties grow better.
Closely working with your suppliers can help both parties create a bond that would boost collaboration.
This collaboration would aid communication between both parties, and working together would become more seamless and smooth.
Reduces Costs – What is a Supplier in Business
When you work with a supplier for an extended period, you will start to trust them more.
They would come to trust you too.
This could help you trust them with more of your business processes.
You won’t have to work with several suppliers and would rather charge the few you trust to provide different materials for you.
With this, you can easily negotiate a better price to help you cut costs.
As the communication flow between both parties improves, they’ll understand each other more.
The supplier would become more in sync with your business.
They would begin to know the products that you would prefer and the ones that you wouldn’t be interested in.
You would also know when your supplier would have what you need.
So, you would order them at the right time and get your order in time.
All of these will make your processes more optimized and help you get things done in record time.
Tips for Supplier Relationship Management – What is a Supplier in Business
If you want to achieve the best relationship with your suppliers, then there are certain things that you must do.
Suppliers are external parties in your business.
While you want to maintain a good relationship with them, you also want to be careful not to share vital information about your company with them.
This means that you need to create a perfect balance in your relationship.
Where your suppliers will know how much you value them.
But you’d also maintain the necessary boundaries that you have to maintain.
The following tips should help you achieve this.
Build Strong and Lasting Relationships
Assuming your company would need the services of a supplier more than once, you should work on building a strong and lasting relationship with them.
This would help you communicate with them easily.
The suppliers will know how best to handle your company’s needs.
Pay Your Suppliers On-Time
You do not have to be told for you to know that not paying your suppliers on or before the payment due date can put significant strain on the relationship.
This is why you should do your best to pay your suppliers on time.
Make sure to track your orders so you know when payments are due.
If you fail to pay your suppliers on time, they may start doubting you, making them sceptical about working with you in the future.
But they will be happy with you when you pay them on time.
They can even consider making your payment period longer.
Have the Right Software
There are so many supplier management applications that you can use to regulate your relationship with your suppliers.
These apps can help you easily track your supplies and orders.
This way, you won’t miss your payment dates just because you cannot track them.
You can also use the data you generate through the software to discover the areas you need to optimize your supplier relationship.
Always Vet the Suppliers – What is a Supplier in Business
Before you decide to work with any supplier, you need to properly research them to ensure they can meet your needs.
Always make sure you make proper inquiries about them.
Ask for references and speak to them.
Find out the experience these businesses had with the supplier you want to hire.
Evaluate the risks of working with the supplier and ensure you won’t regret working with them.
Doing all these will help you mitigate the potential risks of working with them.
Streamline Supplier Agreements
SSA or streamlined supplier agreements means that every supplier will be treated the same way regardless of the service they offer.
You should have this contract as it will govern how suppliers would be treated in your company.
When everyone in your workforce knows how to treat suppliers, it will be a whole lot easier to maintain a good relationship with them.
Differences Between Suppliers and Other Related Terms – What is a Supplier in Business
There are other terms that people tend to use interchangeably with “supplier”, such as vendor and distributor.
However, these things do not mean the same as “supplier”.
They all have different roles in the supply chain.
To help you understand better, let’s look at these terms below.
Vendors Vs Suppliers
Vendors are businesses or people that offer services or goods directly to customers.
A vendor may have a physical store or operate their business online.
Suppliers are major parties in most distribution processes.
However, vendors are not part of this process.
Suppliers often offer their services to other businesses.
So they often sell products in large quantities.
However, vendors often operate on a considerably smaller scale.
While you can only use the word supplier for B2B (Business to Business) relationships, you can use the word vendor for B2C (Business to Customer) and B2B relationships.
This means that as a business, you can still work with a vendor.
Suppliers communicate directly with manufacturers.
Due to this, they can easily buy in bulk and at a discounted price; this makes it possible for them to offer their customers these goods at a better price.
On the other hand, vendors don’t have this connection.
Should You Work With a Vendor or Supplier?
As a business owner, you can work with both suppliers and vendors.
However, whether you choose to work with a vendor or supplier would be based on your specific needs and situation.
In some situations, you’d find that working with a vendor is better.
But in another situation, it would be best to work with a supplier.
So, how do you know which to work with in which situation?
Well, as a general rule of thumb, you need a supplier when you want to buy many raw materials for your business processes.
Distributors Vs. Suppliers – What is a Supplier in Business
Suppliers often supply services and products to another business entity.
This other entity is usually a distributor.
This means that unlike what most people think, both terms do not represent the same thing.
A distributor buys goods from a supplier and then sells them to retailers.
They buy these goods at a lower price from suppliers and then sell them for a profit.
Suppliers get their products directly from manufacturers.
A supplier can also be a manufacturer.
In this case, they can’t still be the ones to distribute their products.
So, they have to work with distributors who can help them with this activity.
To break it down, the major difference between both of them is that suppliers work closely with manufacturers while distributors work closely with retailers.
How to Negotiate with Suppliers – What is a Supplier in Business
Before you choose to work with a supplier, you need to research them to ensure they offer the best services.
You should take your time to evaluate them and be sure they have certain characteristics that will make working with them go smoothly.
You should look out for suppliers’ reliability, quality, good customer service, clear communication, financial security, flexibility, and speed.
Once you are sure that a supplier will provide the best services for you, you need to negotiate the terms of the deal before you sign the contract.
Negotiating properly can help you make a better deal.
So, you need to know how to negotiate.
The following tips should help you with your negotiations.
Do Not Go With the First Offer
When you get the first offer from the supplier, you should not jump on it.
This is one of the basic tips about negotiating.
You can always get a better deal by asking for a second offer.
Tell them to give you a better price and use what you have to offer as leverage.
For example, you could use the number of products you want to order.
Or that you want to create a strong relationship with them so they’d be your go-to whenever you need the particular service they offer.
Give a Bigger Deposit to Get a Higher Discount – What is a Supplier in Business
When negotiating with a supplier, you should know that they, like any other business, want to work with people who can pay for their services.
They want to ensure you won’t give them a hard time after receiving the deliverables.
This is why they often ask for deposits.
You can use this to your advantage.
If you can afford it, you can offer the supplier a bigger deposit in exchange for a higher discount.
Be a Good Customer
People prefer working with difficult customers.
Typically, businesses work with demanding customers not because they want to but because they need to make sales.
So, when working with them, they would stick to the usual way of working.
But you’d easily attract incentives and other perks when you are a good customer.
You can get the best deals from your supplier by treating them well.
So, maintain a great relationship with them and treat them with respect.
Conclusion on What is a Supplier in Business
Having a good supplier can help you optimize your business processes.
It can help you reduce costs and gather market insights that will help boost innovation and your competitive edge.
This is why you should take supplier relationship management seriously and maintain a great relationship with your suppliers.