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I’m suffering from an unreliable supplier. Should I cut my losses?

Monday, 16 May 2011 | By Gillian Franklin

I’m suffering from an unreliable supplier. They provide the best quality goods for our business, which was the reason I went with them, but they are often late and are vague with additional costs. It’s even tricky to get them in the office for a sit-down meeting.


Should I cut my losses and look elsewhere or keep spending the time trying to get them to get their act together?


 

I am not sure if your business is a wholesaler or retailer but, irrespective, the same principals will apply – if you don’t have product to sell, you cannot make sales.

 

Reliable product supply is essential for the success of your business so you need to resolve this problem quickly.

 

There are a number of suggestions for you to consider:

  1. How clear is the agreement? You need to have written purchase orders that set out price, delivery dates and any agreed charges. Sometimes the person is not clear on the importance of every aspects of the contract.

    So the first suggestion is to ensure they fully understand the delivery dates and consequences of late delivery to you and them (if your sales decline because of out of stocks, so do your purchases).

  2. Can you implement into the supply agreement financial penalty clauses? This often keeps the supplier more focused on delivery dates. Example, for every day the delivery is late, you receive a percentage discount. So if they’re four days late, you get a 4% discount.

  3. If they are an important supplier because of their quality but their deliveries are impacting your sales, can you carry additional inventory to allow for the lateness, but then not having your sales opportunities impacted?

    You may even wish to advise them of this, ie. you will need to carry extra stock because of their unreliable supply and therefore can they give you this order with extended payment terms? This way your cashflow will not be penalised for their problems.

If none of this works, I suggest you find another supplier. It is good practice anyway to have more than one supplier so your business is always spread and not vulnerable to another party.

 

As you start working with another supplier, don’t make the change in one go. Split the orders over a period of time and don’t cancel with your current supplier until you can be satisfied the new supplier is reliable.

 

Often just doing this will make the existing supplier sit up and take notice and will then improve their service too.