by Sharon Jones
Entrepreneurs seem to have a different conceptual box for their business compared to those of their suppliers. When it comes to the entrepreneur’s business, the underlying assumption is that one has to engage in a constant battle to convince customers that the firm provides great solutions to problems and that customers can get the level of service that they want. But when it comes to suppliers, many business owners assume that the supplier has their business model nailed and that one supplier is just as good as another.
These assumptions, however, can get you in trouble. If you believe that suppliers are automatically providing the best service possible, then you won’t explore alternatives, and you may not get the best deal. In this article, we’re going to take a look at some of the questions that you should ask your supplier, and why. With these questions, you’ll be able to determine whether you should choose to enter into a long-term relationship with a distributor.
Question #1: When Is The Ownership Of Products Transferred?
Some suppliers will market their services as offering instant transfer of ownership. But although it might sound good taking possession of stock as soon as it enters your premises, there aren’t any advantages for your company and potentially many downsides.
Products, for instance, may arrive at your facility incomplete or damaged. Clearly, products that are not in good working order do not have as much value to you, so you’d prefer not to take ownership until you have verified that everything is in good working order.
Smart entrepreneurs include a delivery and inspection clause in their contract with suppliers. Transfer of ownership only takes place after the receiving company has had time to inspect the goods for integrity and make sure that they meet their specification. Sometimes, the transfer of ownership can take as many as five working days to give companies adequate time to check their goods.
Question #2: How Do You Keep Track Of Orders?
Suppliers should offer a way of keeping track of orders received, those en route, and the date by which various invoices must be paid. If a supplier doesn’t give you tools to track orders, then you may need to invest in your own in-house service.
Some organizations, such as dental practices, have to keep track of a small volume of highly bespoke inventory. Tools for dental professionals are coming online now which allow them to keep track of individual orders from a range of suppliers, including invoices and payment history.
Other organizations, such as grocers with a higher product throughput need software that allows them to track orders in bulk and place new orders at short notice, as and when customer demand requires.
Question #3: What Right Do I Have If Products Do Not Arrive?
From time to time, products will arrive at your premises late or not at all. Before entering into any contractual agreement, it’s essential to discuss with the supplier how these situations are resolved. Good suppliers will offer discounts for goods that arrive late, but others won’t. If products do come late, you want to make sure that you can protect your income. When goods arrive late, you could potentially lose customers or miss out on sales, so suppliers should offer some form of compensation.
If a supplier cannot meet your order at all, what contingency plans do they have in place? Ideally, they should have a relationship with another supplier who can take over in the event of an emergency, but few businesses in the distribution industry do this. You may need to make your own arrangements.
Question #4: Does The Supplier Offer Guaranteed Sell-Through?
Sometimes products go out of fashion. When this happens, your business can be saddled with a large inventory of unsold stock - not something you want.
Some suppliers, however, offer firms the opportunity to sell stock back at the price that they bought it if they over-ordered. This is a great facility to have when you misjudge consumer demand.
Question #5: Does The Supplier Have A Liability Insurance Certificate?
Liability insurance covers suppliers for costs associated with the return of defective products. However, not all distributors have this kind of protection (even though they should).
If a supplier does not have liability insurance cover, then they may not be able to meet the costs of a product recall. If that is the case, then you won’t get your money back and will have to bear expenses yourself. In the worst case scenario, the supplying company may fold, leaving you out-of-pocket.
The solution to this puzzle is simple: ask the supplier to produce a valid, in date insurance certificate showing the value of goods cover that they have. The amount of cover should match up to the value of goods supplied.
Question #6: What Fees Do I Have To Pay?
Suppliers like to talk about their simple fee structure. But if you’re not careful, you can wind up paying over-the-odds for a range of services not included in the core product package. For instance, some suppliers will charge a re-stocking fee for returned items, even if those items are defective. Also, suppliers may charge additional fuel fees if supplying to specific locations.
The current advice is to go over the contract agreement with a fine tooth comb, looking at all the instances in which the supplier may charge you additional money. You want to make sure that the likelihood of additional fees is low before signing up to an agreement.
Question #7: What Are The Terms Of Payment?
Most suppliers will demand that you pay them within 30 days. That’s standard throughout the industry. However, if you expect that it will take you longer than that to shift goods in your inventory, you can sometimes ask for an extension to 60 or 90 days.
As part of the same discussion, it’s worth asking your supplier if they offer a discount for upfront payment. After all, suppliers would rather get paid sooner than later.