By Rowena S. Aquino
Finding suppliers for your business is as important as running the business itself. Particularly if business success depends on your being able to ensure a constant supply of raw materials, or your finding that equipment that would get your venture off and running.
Building a network of suppliers entails a lot more than flipping the yellow pages and placing an order with the vendor. It can be a start, though.
Miraluz Tan, president of the Philippine Institute for Supply Management (PISM), says suppliers either come to you - if you are doing a good job marketing your business - or you go out looking for them.
For startups, it's usually the second option. An entrepreneur will have to go out of his way to find that supplier who can give exactly what he needs, when he needs it, and at the right price. And if he is in the market for a supplier with whom he can have a lasting, productive business relationship, the search will have to be more careful and thorough.
Tan offers the following avenues where a neophyte businessman looking for suppliers can go for help:
The Yellow Pages.
It can be a very helpful resource if you are in a hurry to find that vendor who can sell you an important piece of equipment or raw material. But if you want to compare prices and quality, the yellow pages may not provide you with a complete roster, as some companies may not be listed as yet. You also have to be familiar with categories in the yellow pages so as not to lose your way when looking for a particular supplier.
Trade Exhibits and Bazaars.
The melting pot of product manufacturers and sellers, it is advisable for a starting entrepreneur to attend these exhibits or bazaars. These events will give you an idea how big the industry is and the chance to deal with suppliers.
Trade Journals and Directories.
Usually available in foreign embassies, trade journals can be an invaluable resource for one who is looking for exporters of his raw materials. The journals can also help one match his products or services with a foreign counterpart.
There are a number of purchasing associations in the Philippines with which the supplier can consult on information about suppliers. The PISM is the largest group of purchasers, counting 300 big corporations as members. There are smaller associations that specialize according to industry.
Chambers of Commerce.
The various chambers of commerce can provide you with information on member companies that can service your needs.
The World Wide Web is a rich source of information about product manufacturers. Usually, suppliers have a website uploaded or a web page made of their company and services which you can visit for background check. But be wary of transacting business with the supplier through the Internet, since the country has yet to pass laws that would extend trade protection to cyberspace. Get the supplier's contact information from the website and arrange a meeting with him.
If you are a born purchaser, chances are your ears are always peeled to the walls for news about who is selling what and for how much. Tan says it takes a "people-person" to know that every instance where he or she gets in contact with somebody who is producing something or knows someone who does can be filed mentally and pulled out later when the need for it arises. Whether consciously or not, people constantly give feedback on their purchases, and it's the buyer's job to be attentive to what the consumers think and feel.
What to look for in a supplier
If Tan were to rank the factors that would affect her decision on who to pick as supplier for her company, the primary consideration would be the supplier's technical capability. It means the supplier's expertise in the product he is selling, and the quality he puts into the product.
Next would be service. Are the orders delivered on time? Does the supplier give technical support to his clients? What's the extent of this support? These considerations will give the buyer an idea whether one transaction has the potential of becoming a regular dealing or it's going to be just a one-shot purchase.
Price competitiveness. Although it comes only as a third consideration for Tan, Assistant Vice President for Purchasing at Nestle Philippines, it can be a major factor for someone who is new in the business. The entrepreneur should balance his search for the most competitive price with product quality.
After all these requirements are met, the purchaser must look into the supplier's track record before arriving at a decision. The entrepreneur will have to do some sleuthing to see if a particular supplier keeps a portfolio of very satisfied clients, or if he has the notoriety of leaving his clients high and dry. Another useful information one can derive from doing a little background check is he will know what the common complaints are against a particular supplier.
Tan said the purchaser has to strike a balance between the suppliers' technical expertise and his motivation for serving his requirements. For example, the product from one supplier maybe superior in quality but the supplier, who may not like the client personally, maybe halfhearted in servicing his requirements. Another supplier's product may not be as good but he is willing to go out of his way to extend technical support. It is a judgment call that only an experienced purchaser is able to make.
In the end, it's the kind of relationship the purchaser would want to foster with his suppliers that will guide his search for one. Tan said the trend among the big players in business is to invest in a small base of suppliers to prepare them to become partners later on.
"Companies with an established network of suppliers invest time and money to enable suppliers to better serve the clients' needs. One avenue is training, to bring the suppliers up to speed with the clients' evolving requirements. A relationship is not fostered if you are just out to make spot purchases. But it has its purpose," Tan points out.
Negotiating with suppliers
Being in debt became something that gave Ed Rosales the chills after his initial attempt at business went pufft. And this credit trauma did not put him in an enviable spot when the time came for him to look for suppliers of raw materials for his next venture. A credit line is almost always a lifesaver for a starting entrepreneur.
Ironically, that Ed is a "good payer" was what enabled his Unik Neytib Shoppe to build a small network of suppliers of gemstones, cord, metal accents and beads that make up Ed's unique pieces. Unik Neytib products are being retailed here and abroad.
"Sa umpisa kailangan cash basis parati para magkaroon ng trust yung supplier sa iyo. Besides, I don't believe in tying down the supplier's money to unreasonably long payment terms. Businessman din ako, I know how it feels to have collection problems," says the 42-year-old entrepreneur.
Of Ed's four Metro Manila suppliers (they have more suppliers in Cebu, their production base), he considers two to be his "most trusted." This means that with just one phone call, Ed can get his supplies when he needs it, at the right quantity, quality and price.
But even Ed's trusted suppliers began doing business with him on cash basis.
"They gave us a credit line when our orders got bigger and bigger, and we've remained a good payer throughout. Na-realize siguro nila the volume of business we're bringing in, so that's how the relationship started.
" Still, Ed felt it wouldn't do if he just relied on one supplier of a particular material, since maintaining a certain volume of inventory is critical in his business. That's why aside from his "suki," he keeps other vendors on his list for emergency cases.
With a business relationship that is built on trust, Ed's suppliers would often go out of their way to ensure he gets a constant stream of supplies, and protection from fluctuations in prices.
Ed never bothers to check anymore if the price he is given is the best there is, as they know more or less the price range of one product and could tell if one item is priced out of range.
"These suppliers know each other and each other's prices. The rates they give to their clients rarely vary." Once you have built a good reputation, you can make good money joining online auctions. All you need to do is know what products are in demand, and be diligent about posting and monitoring the updates on them. "I only do online auctions on the side, but I'm greatly rewarded," says Fernandez.