How to Identify Underperforming Suppliers and to Choose the Right Ones

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Regardless of the industry you are in, managing your suppliers has benefits for your business. A successful company will embrace suppliers, viewing them as partners in helping to grow the businesses in a way that is mutually beneficial. They will have formal systems in place to track and evaluate supplier performance to ensure the smooth running of the business, its overall productivity and profitability.

Identify underperforming suppliers

It’s always a good idea to agree on service levels before you engage a supplier so that you know what to expect from them and they know what to expect from you. Monitoring performance will help to identify if service level agreements are being met and the following are sure signs you have underperforming suppliers.

    1. The supplier is unreliable and makes excuses for poor service. If your shipping schedule is being repeatedly affected by missed or late deliveries and your supplier is more focussed on making excuses than on finding solutions or not taking responsibility for poor quality or service, it is a common indicator of an underperforming supplier.


    1. Underperforming suppliers are also those vendors who simply want to sell to you without any thought that the products or services being offered meet or exceed the needs of your business.


    1. The inventory stock from you supplier is inconsistent in quality. If there are inconsistencies in the quality of your products, your customers are more likely to associate that inferior quality with your business than with that of your suppliers.


  1. A supplier regularly fails to meet expected standards and has no procedures in place to address quality management, corrective actions or complaints handling. They may be completely non-responsive to complaints, cut corners, hand in incomplete or inaccurate paperwork.

Choosing the right suppliers

It’s worth the effort to examine the number of you suppliers really needed by the business because purchasing from a carefully selected group can have several benefits. These include more control over suppliers, that you become an important client to them, and you can source better deals that provide greater competitive advantage for your business. Ways in which you can ensure you are choosing the right suppliers include:

    1. Spending time on research, ask around to acquire useful information from other business with first-hand experience to ensure you are partnering with the right supplier for your business.


    1. Credit checking potential suppliers. It is always worth checking that a supplier has sufficiently strong cash flow to deliver what you want, when you want it. A credit check will provide piece of mind that a supplier won’t go out of business leaving you with insufficient inventory stock in the lead up to your peak season.


    1. Viewing your suppliers as partners, communicating with them openly and honestly. Always being upfront and transparent with suppliers to make sure they understand your needs and expectations.


  1. Establishing performance indicators at the beginning of the relationship to determine what qualities a supplier needs to have or demonstrate to maintain ongoing business with your organisation.

Rid yourself of underperforming suppliers

It doesn’t pay to tolerate ongoing bad service and there may come a time when have to rid yourself of an underperforming supplier. Before you cut ties completely you should issue underperforming suppliers with a warning providing them with an opportunity to rectify the situation. Attach supporting documentation when issuing the warning that indicates areas of poor performance such as quality reports, shipping delays and service level agreements to clarify where the challenge or issue is occurring.

Supplier relationships are business partnerships that when both groups are working as equally hard to ensure the partnership is a success, it will be a success. In the long-term, having a successful and mutually beneficial supplier relationship will ensure your organisation has a sustainable competitive advantage.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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