A regular part of being a business owner is identifying areas of your business where you can trim expenses and needless costs. Key areas you should look at are your vendor and partner relationships.
However, a word of caution here. Don’t just look at piece rate. The true cost of a vendor or partner needs to encompass all of the additional costs that pop up along the way. For example, an unreliable vendor can cost you more in the long run. When you get down to it, if you have a vendor that’s costing you too much money, you can’t afford not to switch.
Focus on Finding the Best That You Can Afford
It’s extremely tempting to just look at the top-level prices and not dig deeper into your true business costs. However, you need to. You need to fully understand the costs associated with your vendor relationships and then determine if you can find something better.
We usually suggest looking for the best vendor or partner you can afford. Even if you end up paying 10 to 20 percent higher fixed operating costs, it could be worth it if you eliminate pain points and additional costs that pop up along the way.
Do a deep dive into the data pertaining to your current vendors. Are they delivering for a fair and reasonable price? Are there a lot of unexpected costs along the way like delayed shipments, unreliable lead times or unreliable quality? If so, it’s time to think about working with a new company.
You Can’t Afford to Go With a Cheap, Unreliable Vendor
What many of our clients found before they worked with us is that their vendors were costing them more in the long run. This is something we try to help them identify when we first have a conversation with a new potential partner.
Our organization reaches target opportunities and after a quick, high-level conversation we either disqualify the target or we quickly identify pain with existing vendors in a couple or few of the deliverables that we know we can improve.
The fact of the matter is that we often determine that we can do the job better and save them money over time even though our piece rate might be higher. In essence, those potential partners can’t afford not to switch. It makes business sense to do so.
If you’d like to start a conversation with us about your business and find out how we can help you achieve your business goals and eliminate unnecessary costs, we’d love to chat.