Product sourcing is a complex process that involves conducting research, vetting potential suppliers, calculating acquisition costs, and negotiating mutually beneficial terms. On the outside, product sourcing seems very straightforward; find a supplier, negotiate favorable terms, sign a contract, and receive your products. However, sourcing can become very complicated without a proper approach.
Your sourcing strategy ultimately determines your business’s profitability. Here are tips to help you develop a sourcing strategy for acquiring high-quality inputs as a manufacturer.
Always Source New Inventory
Complacency is the downfall of many manufacturing enterprises. While you may eventually find a few reliable suppliers, never assume that business will remain as good as usual in the unforeseeable future. Keep on sourcing for new inventory to continue improving, remain relevant and scale your profitability.
Consider Local Suppliers
Many manufacturers hardly give local suppliers a chance and instead turn to countries in Asia and Africa. It might be in your best interest to research local suppliers as they likely meet our supplier quality standards, and the cost of acquisition may be lower. For instance, when sourcing iron ore for manufacturing steel products like galvanized weld mesh and merchant bars, a local supplier will likely deliver quality inputs at a competitive price.
Ask for Samples
Would you buy a car without performing a test drive? As a manufacturer, you are likely to buy products in bulk. Sampling gives you a clear depiction of the quality to expect when you place a bulk order. Part of the questions you should ask when contacting suppliers is whether they can deliver samples. Use the samples to gather feedback from your colleagues, inspect the product up close and assess how a potential supplier handles transactions before committing yourself to a supply agreement.
Maintain Multiple Supplier Options
Always have a contingency plan in your sourcing strategy to hedge your business against unforeseen events. It is normal for businesses to merge or disband, product quality to decline, and certain supplies to diminish altogether.
Having a sound backup strategy can protect your business when a major supplier closes shop, suppliers from one country inflate their prices, rendering your relationship unprofitable, and many more instances. Consider the worst-case scenarios and develop realistic plans of action.
Product sourcing is not always a seamless process. It does not stop at finding a reliable supplier and establishing strong ties. Follow these tips when developing your product sourcing strategy to maintain or improve your product’s quality and boost your profitability.