Factors influencing choice of supplier

Price

The price of supplies will have a direct effect on how much it costs the company to produce a product. A higher cost of raw materials will lead to a higher cost of production. If a company can find a cheaper supplier it could lead to increased profit.

Location and transport costs

If a supplier is located near to your company the transport and delivery costs will be lower. If the product being supplied is perishable it would be better to source a supplier close to your business as they will be able to deliver the goods quickly.

Lead time

Lead timeis the amount of time taken between an order being placed and an order being received. Some companies will require stock to be delivered quickly especially if the products are perishable or the company is using just in time (JIT) stock control methods.

Product quality

The quality of raw materials will have a direct effect on the quality of a business’s finished product. It is important to source supplies of a high standard or it may affect your finished product and therefore your customer satisfaction.

Reliability

If a supplier does not deliver at the agreed time, or with the correct goods, this can affect a business’s ability to produce and deliver their product to the customer.

Reputation

Suppliers that have a good reputation will be more likely to fulfil orders on time and provide a high quality product. If a supplier has a bad reputation you may not be able to rely on them to provide the quality supplies that your company requires.