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Suppliers -

There are a number of factors a business must consider when choosing a supplier, they are as follows (commonly referred to as the Purchasing Mix), the Production Manager will consider the following -

Reliable/Reputation - are the suppliers reliable? Most businesses will run a series of checks on suppliers, including credit reference checks to make sure that they are able to supply as they have said.

Location - is the location of the supplier close? Should the business use a local or national supplier? A local supplier will be able to supply at short notice if needed, but may not have the range of materials and may be more expensive than national suppliers. Will using local suppliers bring any other advantages? If you use a supplier who is not local, delivery cost could be added, a business will want to keep their costs to a minimum in order for them to offer competitive prices for their products.

Delivery Time - Can they deliver on time and meet deadlines? The time taken from placing an order to receiving the materials is called the 'Lead Time'. How important this is depends on the needs of the business, for example it may operate a 'Just in time' system of stock control, where only enough stock to keep production going is held. If this is the case, then the supplier must be able to deliver the materials directly from it's own stores. In other instances the supplier may not be able supply straight from stock, in which case there would be a further delay in delivery. Delays can be acceptable, provided that they have been planned for, so that an order is placed far enough in advance for the materials to arrive when they are needed.

Price - Are the supplier's prices competitive? Ideally, the best price would be the lowest price, however prices are often open to negotiation. Discounts for bulk buying may be available and these must be balanced against how much stock the organisation can buy and store at one time. Other discounts may be available if there is a guarantee that the organisation will place regular orders.

Credit Payment Terms - Does the supplier give extended credit? The business must try and achieve the best available credit terms. The longer it will be before the organisation has to pay for the materials it has received. This has to be balanced against any discounts that may be available for paying quickly.

Discounts - Does the supplier offer discounts? If you buy in bulk you may be able to benefit from 'Economies of Scale'.

Quality - Are the goods of an acceptable quality? What quality means is different businesses, however the quality that the supplier can bring to the business should be acceptable for the business' needs in terms of being suitable for the production process and for the customers requirements. For consistent production, the quality of materials used should be consistent, if the quality is variable this will lead to wastage and poor quality of output on certain occasions. The suppliers must be able to guarantee that the materials will meet the business and legal requirements and consistent.

Quantity - Can they deliver the desired quantity? Although there may be discounts for buying in bulk, these have to be weighed against cost of storage. It id thought that the storage adds a further 15%-30% to the cost of purchasing, so ideally the quantity bought should be as low as possible. The stocks may deteriorate over time, leading them to be scrapped. The organisation could also be left with unwanted stock as fashions change. These all mean further cost for the organisation, which should be avoided when possible.

Storage - How much space does the business have to hold the raw materials until they are required.