Look at Your Critical Suppliers

Make a list of your critical suppliers; materials, labor, out sourced services.

What happens if you lose a source or if the supplier fails to perform or raises prices? Can you quickly replace the supplier? Can you use two suppliers for critical materials and services to create competition and at the same time have a back up?

When we were building homes we put together a team of subcontractors that we trusted and trained to build to our standards. We negotiated price increases when necessary and though we were controlling quality by limiting sources.  The owners of one of our subcontractors had a health problem and as a result they were unable to perform the work. We had to scramble to find a new subcontractor under the pressure of our schedule. We were fortunate to find several relatively quickly that were able to do the work to our specifications. We also discovered that they were able to do it at a far better price.

Over time the supplier had raised our prices a little at a time and we failed to notice. We replace the subcontractor with two and split up the work. We also began looking at our other long time subcontractors and were able to significantly cut costs.

You suppliers are a critical part of your business but they are also in business and what may be good for them might not always be good for you. I am not a big fan of changing long time suppliers for a small price advantage but I think you need to keep looking.  I am also not a big fan of changing suppliers every time a small disagreement or problem arises.  Working through problems often benefits both parties and reduces future problems. Changing suppliers may solve the problem in front of you only to discover all new problems you never anticipated.

We always treated our subcontractors and suppliers as partners… that we need to keep and eye on.