What is a Supplier Strategy? – Definition
A supplier strategy is an integral part of any successful business. It defines the way a company will interact with its suppliers and the criteria used to select, manage and monitor them. It’s important to have a well-defined strategy because it helps you make sure that you are getting the best value for your money in terms of quality, price, service and delivery times. In this article, we’ll look at what a supplier strategy is and why it’s so important for businesses today.
What is a supplier strategy?
When it comes to business, the term “supplier strategy” refers to the process and/or plan that a company uses to determine which suppliers they will use in order to obtain the materials or services they need. This strategy takes into account a variety of factors, such as cost, quality, availability, and delivery time.
The goal of having a supplier strategy is to ensure that a company is able to obtain the supplies it needs in a timely and efficient manner, while also keeping costs down. A well-thought-out supplier strategy can help a business run smoothly and avoid any disruptions that could come from using an unreliable or unresponsive supplier.
The different types of supplier strategies
There are three common supplier strategies: make to order, assemble to order, and make to stock.
Make to order: This strategy is often used by companies that sell custom products or require a lot of customization. The company does not start production until it receives an order from the customer. As a result, there is no inventory and no risk of obsolescence.
Assemble to order: This strategy is similar to make to order, but the company uses standard components that are stored in inventory. Production begins only after the customer places an order and specifies which components are needed.
Make to stock: This strategy is often used by companies that sell fast-moving consumer goods. The company manufactures products in advance and stores them in inventory until they are sold.
Pros and cons of each supplier strategy
There are several supplier strategies that companies can use to source materials and services. Each strategy has its own advantages and disadvantages that should be considered before making a decision.
One popular supplier strategy is make-to-order. With this approach, companies only produce goods or provide services after receiving an order from a customer. This can be beneficial because it allows companies to avoid the significant cost of holding inventory. It can also be disadvantageous because it can lead to longer lead times and poorer customer service.
Another common supplier strategy is make-to-stock. Under this approach, companies produce goods or provide services in advance of customer orders, in anticipation of future demand. This can help to improve lead times and customer service, but it also incurs the cost of holding inventory.
A third supplier strategy is consignment. With this approach, suppliers ship goods to a company on an as-needed basis, and the company only pays for the goods when they are used. This arrangement can save on warehousing costs, but it requires close coordination between the supplier and the company to avoid stock outs.
Each of these supplier strategies has its own pros and cons that should be considered before making a decision about which one to use.
How to choose the right supplier strategy for your business
The first step in choosing the right supplier strategy for your business is to assess your needs. What are you looking for in a supplier? Is price the most important factor, or do you need a supplier that can offer superior quality products or services? Once you know what you need, you can begin to research different suppliers and compare their offerings.
Another important consideration when choosing a supplier strategy is lead time. How quickly do you need the products or services? Some suppliers may be able to provide them faster than others. You’ll also want to consider delivery times and any other factors that could impact the timely receipt of your order.
You should also think about your future needs when selecting a supplier strategy. Will your needs change over time? If so, you’ll want to choose a supplier that can accommodate those changes. Additionally, it’s important to consider the scalability of your chosen supplier. Can they handle an increase in orders if your business grows?
Finally, you’ll need to decide how you will manage the relationship with your chosen supplier. Will you work with them directly, or will you use a third-party vendor? Each option has its own advantages and disadvantages, so be sure to weigh all of your options before making a decision.
In conclusion, supplier strategy is an important concept for businesses to consider in order to increase their competitive advantage and ensure that they are getting the best value for their resources. By successfully understanding and implementing a supplier strategy, businesses can optimize their supply chain processes, reduce costs, and build strong relationships with suppliers. Overall, a successful supplier strategy helps a business achieve success on many levels.