Factors influencing choice of supplier
Price
The price of supplies will have a direct effect on how much it costs the company to produce a product. A higher cost of raw materialsThe basic materials that are used to produce a good. will lead to a higher cost of productionThe costs a business has to pay to produce a product.. If a company can find a cheaper supplier it could lead to increased profit.
Location and transport costs
If a supplier is located near to your company the transport and delivery costs will be lower. If the product being supplied is perishablePerishable goods are items such as food that do not last or go bad after a short period of time. it would be better to source a supplier close to your business as they will be able to deliver the goods quickly.
Lead time
lead timeThe amount of time between an order being placed with a supplier and its shipment.is the amount of time taken between an order being placed and an order being received. Some companies will require stock to be delivered quickly especially if the products are perishable or the company is using just in time (JIT) stock controlThis is a system of stock control where stock is only ordered and received just before it is required. stock control methods.
Product quality
The quality of raw materials will have a direct effect on the quality of a business’s finished product. It is important to source supplies of a high standard or it may affect your finished product and therefore your customer satisfaction.
Reliability
If a supplier does not deliver at the agreed time, or with the correct goods, this can affect a business’s ability to produce and deliver their product to the customer.
Reputation
Suppliers that have a good reputation will be more likely to fulfil orders on time and provide a high quality product. If a supplier has a bad reputation you may not be able to rely on them to provide the quality supplies that your company requires.