Friday, November 5, 2010

Finding great suppliers

I recently did a guest post on Startup Smart and I thought I'd cross post here.

I’m starting up an online business and am struggling to find a suitable supplier. How can I go about finding a supplier and what are the main things I need to look out for to ensure that they are the best fit for my business?

Unless you're planning to launch a completely vertically integrated business, which most startups won't be, finding good suppliers is a critical step and one you'll want to get right from the beginning.

Step 1: What do you plan to outsource?
The easiest way to answer this question is to determine what your skill sets are. These areas will likely be the parts of your business that you manage in house. Most other parts of the business you'll likely be outsourcing and you can then start looking for suppliers. In our case at Shoes of Prey, our skill sets are in online marketing and web development, not shoe manufacturing so we outsource the manufacturing of our shoes.

Step 2: Find great suppliers
There is no easy way to doing this. For the critical parts of your business you'll want to invest a lot of time researching and finding great suppliers. Given we're a retailer of custom made shoes, having great shoe suppliers is a key part of our business. One of the first things we did in getting our business off the ground was to travel through Europe and Asia meeting with various shoe suppliers. We met the key people in the business in person, toured their factories, purchased and tried out their products, got to know who their existing customers were and even spoke with some of their existing customers. We then settled on two suppliers who had a proven track record and very high quality shoes. Price was an important factor, but not the most important for us. The key for us was finding suppliers who matched our brand in the way they operated and the quality of the shoes they made.

Step 3: Have backup suppliers
If your suppliers supply you with something that's critical for your business to operate I would recommend finding at least two suppliers to work with in case something happens with one of them. We originally started working with one shoe factory and had a second as a backup. This was fortunate because 2 months after our launch when our orders started to increase, our first factory said they were very busy and couldn't handle the increase in demand. We immediately switched to our back up supplier and ever since we've spread our orders across the two suppliers based on who can take the orders at the time. Having two suppliers also puts us in a better negotiating position when it comes to discussing important issues to us like time to manufacture, the quality of components and workmanship and price.

Step 4: Maintain the relationships, it's a two way street
Once you've found your suppliers it's then crucial to maintain strong working relationships with them. Meet with your suppliers regularly, let them know your growth plans and how you're tracking to those plans so your suppliers can be prepared to scale up with you. Be open to their needs as well, just because you're paying them doesn't mean you can't do things to help make the working relationship easier for them. In our case we travel to China 3-4 times a year to meet with our suppliers as well as speaking to them regularly over phone and email. We make a point of always asking what we can be doing to make working with us easier, and we've adjusted our order forms and other processes within our business to help our suppliers operate more efficiently.

Finding great suppliers can make or break a startup and it's a critical step to get right. When it works well it can also be very rewarding and a lot of fun.

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