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Types of Suppliers (& Things to Consider When Choosing)

Written by, Alex Bosnjak

Updated June, 5, 2022

A disruption in the supply chain can cause up to a 62% loss of finances. In addition, it can affect other aspects of the business, such as the reputation and the logistics, which can reduce the profitability. 

One of the key factors in a business’s success is finding and aligning with a reliable supplier or suppliers. So today, I’ll look at different types of suppliers and things to consider when choosing the right supplier for your business. 

Types of Suppliers in Retail

There’re different supplier types in the supply chain:

1. Manufacturer and Vendors

You can get the products or merchandise for your business directly from the manufacturers or vendors. The manufacturer is the owner of the products.  There’re several benefits of buying the products at the earliest point in the supply chain, such as a continuous supply of goods and cheaper costs. 

Pros

  • Better control over the standard and the quality of the products
  • Dealing directly with the manufacturer gives you the advantage of getting the stock at a lower price
  • Good chance to get a customised product
  • If you have invented a product, you can get control over the production, bringing quality products that meet the market requirements, which means more profitability
  • An agreement with the supplier for regular and bulk orders

Cons

  • Most manufacturers prefer bulk orders with minimum requirements.

2. Distributors/Wholesalers

Wholesalers and distributors order or purchase products in bulk from different manufacturers. Then, they stock the products and sell them in smaller quantities to other businesses and retailers. As a result, they can distribute products in both bulk and smaller quantities which the manufacturers don’t allow.

Pros

  • Wholesale price allows the sellers a good profit margin
  • Fast turnaround times in delivery
  • You can make orders for small and large quantities of goods

Cons

  • No customisation of goods
  • The size of the order is sometimes limited

3. Importers

Importers buy goods and products from the manufacturers based in other countries and bring them in bulk to another country. Then, they sell the imported products to other businesses or retailers in bulk and in smaller quantities.

The importers as suppliers are ideal for wholesale businesses, small businesses, and retailers. 

Pros

  • Breaking the bulk — The importers order the products in bulk from the manufacturers abroad. They break the bulk into smaller portions that meet the needs of smaller businesses
  • Reduced shipping costs — Shipping from an oversea manufacturer is expensive in terms of shipping fees and logistics. When ordering from the importers, the shipping costs are lower
  • Low transporting costs Most importers arrange for the delivery of the products, either for free or at a minimal cost to their clients
  • Access to goods from different manufacturers around the world — the importers avail a wide range of products from different manufacturers to the retailers and other businesses

Cons

  • The cost of the products could be higher as compared to buying directly from the manufacturer, especially on bulky orders
  • The turn-around time for the goods is delayed in most cases

4. Sub-contractors

This type of supplier includes the tradespeople. Namely, subcontractors act as agencies or brokers for manufacturers or wholesalers. 

If you’re looking for sub-contractors to supply to your business, you can reach out to them directly or contact an agency. 

Pros

  • Smaller quantity of goods
  • Cost-effective in terms of shipping and transporting fees.

Cons

  • Limits to the size of the order

Things to Consider When Choosing a Supplier

Let’s go over things you should think about before picking a supplier:

  • Price — One of the key aspects to consider in a supplier is the cost. The cost doesn’t only involve the strategic price of purchasing the goods but also the cost of other factors. For instance, you must consider the logistics, transport and shipping costs. 
  • Quality Also, you have to assess the product quality or the quality of materials used on the products. You can rely on the samples or the pictures and the description of the items before you determine the order size. Also, check the reviews from their past clients.
  • Minimum order quantity — Some suppliers have a minimum quantity for orders. If you intend to order directly from the manufacturer, check if they have a requirement regarding the order quantity.  
    • For instance, if you’re running a retail store, you might not need bulk orders, and the manufacturer might not accept them as it doesn’t meet the minimum requirement. In this case, it’s best to order from the wholesalers or the importers as they don’t have the minimum order restrictions.
  • Delivery time — The supplier must indicate the estimated delivery time after you make an order.  You can speculate the delivery speed of a supplier by checking the number of customers they supply. Also, read the reviews to understand their efficiency in serving customers and delivering orders. 
  • Payment terms — Find a supplier with favourable terms regarding modes and payment methods and negotiate the terms. For instance, are they willing to give products on credit? Are there discounts for prompt payments?
  • Supplier’s stability — The supplier’s reliability and stability can make or break your business. If the suppliers show signs of instability or unreliability after a few transactions, talk to a supplier and determine what to do next. You should constantly evaluate the reliability of your suppliers.
  • Supplier’s Scalability — Consider the supplier’s size before you start dealing with them. For instance, if you require higher quantities in the future, consider whether the supplier will be capable of meeting your demands or not. In addition, ensure that the suppliers can adjust to accommodate your growing business; whether the order is bulk or small, the supplier should easily supply you. 
  • Customer Support Timely communication and good customer support are also key factors when dealing with the supplier. In addition, the supplier should be clear on aspects such as shipping and delivery of the products.

Conclusion

Before reaching out to a supplier, you should understand aspects such as the financial capability and scalability of the supplier, the quality of the products, and the minimum order. 

Also, if you’re dealing with a one-time project, you should consider a reliable material supplier. Favourable terms and a good relationship with a supplier can help in the growth of the business. 

FAQ

Can I Have Two or More Suppliers?

Yes, you can have more than one supplier for your business. It can bring you more value for your money, hence more profitability. Dealing with different types of suppliers in the supply chain has its own perks, but dealing with one supplier is much easier.