Posted on July 17, by sherrygordon Many firms are aware that they are dealing with too many suppliers. So they figure that the first thing they need to do is reduce the number of suppliers.
You often have choices between purchasing goods and services from large or small companies, with the lowest price often not the best determining factor. Knowing some of the more common advantages and disadvantages of working with companies of different sizes can help you not only make the best choices for your business, but also apply what you learn as you compete for customers against larger companies.
Price Your price advantage usually varies when you work with large and small companies.
Buying from a large company often gives you a price advantage because its greater sales volumes provide it with economies of scale that let it lower its prices and still make a large gross profit. Buying from large companies can be a disadvantage if they have a higher perceived quality and set their prices higher than the rest of the market to take advantage of customer hesitation to buy from smaller companies.
Smaller businesses can provide you with a price advantage at times if they have lower overhead and might underprice to gain market share. If you want the better customer service that often comes with working with a smaller business, you might have to pay higher prices.
Customer Service Small and large businesses provide different levels of customer service based on their need to keep customers happy and their ability to do so.
When you buy from a larger company, you are a small fish in a big pond. The opposite is true when you buy from a small company. Smaller companies often want to keep any business they can secure, providing excellent customer service, or might be too small to take time away from sales activities to provide customer service.
Credit If you need to purchase on credit, working with large or small companies can affect the terms you get, tipping your decision one way or another.
Large businesses might require financial documents and references, charge higher interest rates, offer shorter payback terms and include penalties for late payments.
They might also be more aggressive in reporting you to a credit bureau and turning your account over to a collection agency.
Small businesses might not be able to extend you any credit, requiring you to pay cash on delivery or a deposit up front.
A small business that supplies you with materials or services is more likely to give you shorter payment terms, such as net 10 days, rather than letting you pay in 30 or 60 days, which may cause a problem for your accounts payables, but if you work with a small business on a long-term basis you might more easily ask for an occasional extension when cash is tight than with a larger company.
When you work with a large company, the amount of business you provide might not allow you any negotiating power. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer.Journal Management Supplier Diversity and Competitive Advantage: Volume 11 Issue 3.
Supplier Diversity and Competitive Advantage: New Opportunities in Emerging Domestic Markets. exclusive arrangements with a limited number of suppliers. Currently, many minority businesses do not have adequate size, capital, expertise, or. Rules & Regulations that Limit the Number of Suppliers.
2. nd. Session, Topic 1 Declan Purcell 24 September Limiting the number of suppliers Laws, or proposed laws, can restrict entry Benefits of Competition. Selected Examples – Entry in Airline Markets.
SMALL and LOCAL SUPPLIERS PROCUREMENT POLICY. Align buying from small and local suppliers to the objectives of the BBC’s national contracts that can be a barrier for smaller and local suppliers. A number of potential barriers to entry for small and local suppliers and ways to navigate.
Public Benefits and Costs Local stores in town centers require comparatively little infrastructure and make more efficient use of public services relative to big box stores and strip shopping malls.
8. In the wake of the SARS scare and 9/11, some companies learned the lessons of having too few suppliers the hard way. For this reason, leading companies in procurement, as identified by Hackett, slightly increased the number of suppliers they use during the past few years.
PUBLIC PURCHASING FUTURE: BUYING FROM MULTIPLE SUPPLIERS Merijn M. Linthorst and Jan Telgen* have to be made is the selection of the right number of suppliers for a * Merijn M. Linthorst, On the other hand if producing in smaller batches generates more waste, buying from multiple suppliers could in fact be.