Supplier Evaluation

Types of Suppliers Local vs. National Suppliers

Among the most significant are the following:

1. There is usually a freight savings when the distance between firms is relatively short.

2. Local vendors tend to share the same political and tax concerns as the purchaser.

3. Close proximity permits many possibilities for communication and service; shorter lead times, and exchanges.

There are also considerations that favor national suppliers:

1. National concerns may offer lower prices because of their ability to produce in mass quantities for large numbers of customers.

2. Technical assistance may be better from large firms that provide extensive research and development support.

3. Continuity of supply may be more certain with larger-volume producers, which exercise considerable raw material purchasing power and maintain large in-process and raw materials inventories.

Distributor vs. Direct

The manufacturer often offers lower prices than the distributor; this difference usually depends on the volume of business.

1. Manufacturers generally prefer large-quantity orders.

2. Manufacturers often find small-quantity purchases unprofitable, considering the expenses involved, and charge a premium price to compensate.

Thus, a distributor may offer lower prices on purchases of smaller quantities.

Since distributors are generally local firms, they are often able to provide better service than manufacturers.

Another factor in the decision concerns inventory levels.

Buying direct usually means buying in large quantities, and the purchaser must hold these quantities in inventory.

In contrast, the distributor maintains a local inventory, and the buyer can utilize it, making smaller, more frequent buys.

Location

1. The geographical location of the supplier is an important consideration in evaluating service.

2. Shipments from distant suppliers are subject to more and greater risks of interruption by accidents, strikes, and...