Six steps to finding an OEM supplier

by Sabinna on April 10, 2010

It’s my first visit to this operation. The production areas are compact, clean and neat; well-organized. This is no line-production process as such. Each section has its artisans working on their cluster of framesets. Amongst the brands represented are Colnago and Pinarello as well as a production of Rivendell Hillbournes–a good sign. I’m here to meet the owner of this high-end frame painting operation, as a recent incident means that I have to change suppliers. My original painter can still powder-coat my alloy frames. However not my carbon ones. I have had to apply the following procedure to identify a new, quality supplier of this all-important service.

There are a series of practical steps you can take to finding a business partner to supply you with what you need. Of course, these are not a blueprint of the way to find a supplier; they describe my experience and what works for me. Alongside of these are three interlinked ‘capacities’ that you either need to already posses, or be committed to developing, if these steps are going to produce results for you. These are 1. ‘the sense’ 2 industry knowledge 3 patience. Of these three, the first is paramount. You’ve got to have that “sense” to know which company is the right one to deal with, a sense of who are the people with whom you will partner in advancing your business. If you don’t have it, you need to develop it. Going through the process outlined below is probably the best way to do it. Anyhow, I will draw your attention to each of these as they relate to the steps outlined below.

Step 1. Identify possible candidates from the trade guides, for example Taiwan Bicycle SourceGlobal Sources, or  B2B Manufacturers are good places to start. A good guide gives an overview of a company’s products and some product details, along with the all-important contact details. Of course, a recommendation from within the industry can be also very valuable. ‘Can be’, since there are a number of factors underlying a successful business relationship. Most relevant is that the scale and scope of business that suits you at a particular stage in your development will limit the number of potential partners that make a good fit for you. You will find that many businesses can supply what you need. Important questions that arise here include minimum quantity. If you are small, then a smaller supplier with a smaller minimum quantity will be more relevant to you. The size issue is important. Many of these enduring relationships are between businesses at a similar stage in their development–the mutual fit is good.

An additional question here is what are the merits of approaching and dealing with a number of suppliers at the same time? If you are large then you may have the luxury of being able to do this. Later on then approaching different suppliers will become essential in order for you to negotiate a better price, as your purchasing power, and therefore your negotiating power, increases. If you are small, make contact and assess the nature of the contact. Be patient and make a balanced assessment. If you make approaches to several suppliers, assess the feedback according to the steps below. However, I think patiently working on bilateral relationships rather than working on many fronts ‘multilaterally’ will yield a quality outcome.

Step 2. Make contact. This is where it starts to get interesting. Once you have identified a potential candidate or even come up with a shortlist, you now need to apply “the sense”. Important here is whether or not they have a website I personally put great stock in my suppliers having not just a website, but a substantial, well-organized site. In my view if there is quality here, then there is a higher probability that there is quality to be found in other areas of the company. Anyway, fire off an email enquiry stating your needs. In making contact, you need to know what you want. This will greatly simplify matters. The more you know (the second capacity), the greater the probability of developing the right kind of relationship.

Step 3. Assess the reply. If they dont reply, move on. Now, should they produce exactly what you need at seemingly the right price (assuming you may already have information on this), it may be tempting to resend an email. For me, no reply is a red flag. There is no shortage of other suppliers out there. Just move on. If there is a delay in reply (not unusual), you will have to balance this against the quality of the reply (may ‘the sense’ be with you).

A good quality reply is one which answers all your questions clearly and succinctly. Weak or weird answers are unacceptable. If questions are not answered, especially in any followup emails, or answers are given to questions you did not ask (whose agenda is this anyway??), or prices quoted are way too high or way too low (you will need to exercise the second of the three capacities, ‘knowledge’, here), then move on. If things are going well, a Skype video call may well be a good idea. There is nothing like seeing who you are dealing with and talking directly with them–then you can pick up that nervous tic just below their right eye [:-)]. You will gain invaluable information and also contribute to honing your developing “sense” about people, and your potential business partners in particular.

Remember that size matters. If you are dealing with a bigger, well-established company, you will probably get the attention and service that relates to the projected size of your order. Naturally, the bigger you are–assuming this translates into a more substantial order–the better the price you will be offered. This needs to be taken into account in assessing quality and quantity of email traffic. And if there are problems, the bigger you are, the more likely any complaints you might have will be actively listened to.

Step 4. Face-to-face meeting, or straight into an order? As mentioned above, a Skype video call is always a good idea. Better still is a face-to-face meeting. A good potential supplier who sees in you the potential of a valued customer should be happy to do this. The second of the ‘capacities’ outlined above comes into play here: patience. If you can get a meeting at a trade show, excellent. You will be able to cover a lot of ground by making direct contact with a number of your potential targets. However, if the trade show, or shows, are still some time away, and you need to move quickly, then this may not be an option. I will say on this that patience is extremely important. Things never move that fast in this industry. Take your time. Best of all would be a visit to the site of production. You can directly experience the operation. This will enable you to make a quality evaluation. In sum, I would recommend a face-to-face meeting.

Step 5. Place an order. Whether or not you opted for the face-to-face meeting, the next key step is in placing an order. It should be small. No need to stake the farm on an untested relationship. You will probably have to pay a deposit and then TT the rest in advance before shipping. As long as all this is made clear and the procedure unfolds smoothly, well and good. It’s a good start. The quality of the developing relationship is to be found in future orders. Of course, an order placed and paid for where the goods do not arrive, is the price of insurance. What you are trying to do here is reduce your risk. A small order is an acceptable insurance premium. Observe patience, add the experience to your evolution of ‘the sense’.

Step 4, and a lot of what preceded it, is considerably enhanced should you have plenty of the third of the ‘capacities’ mentioned at the outset: knowledge. You need a good knowledge of your industry in general (which feeds into ‘the sense’)  and of the specific need which led you to seeking a supplier in the first place. The more you know about that angular contact headset bearing, for example, the better. Of course, a quality business partner should be willing to fill in any gaps in your knowledge. And here you should be able to exercise ‘the sense’ that they know what they are talking about.  Or if it is a large company, your contact person should have that knowledge. If they dont, they should have convenient access to the people who do. At any rate, after a number of successful transactions, if you have still not had a face-to-face meeting, you really do need to take this step.

Step 6. Maintain the relationship. Seems like I should stop here. You found your supplier. Things are going well. End of story. Not so fast. The reason why patience in this business is so important is the degree to which things can rapidly change. I had this happen to me recently: my painter decided that painting carbon frames was no longer worth his while. This was a great pity since he was absolutely first-rate at the art. The owner of a large operation, he personally undertook the painting of carbon frames. I have had to initiate steps to find a quality replacement, hence the story with which I began this piece. Even if this does not happen to you, ongoing monitoring, assessment and maintenance of the relationship is vitally important.

There are a number of other important considerations to take into account here–and price is not one of them. It’s one thing to negotiate the purchase of commodities. It’s quite another to ‘commoditize’ your business relationships. High-quality communication and high-quality service are paramount. It is well worth paying a higher-price for this. After all, quality here ensures consistency and quality in the service you can, in turn, provide to your customer, since they are probably going to be judging you on the same criteria. If your supplier consistently comes through for you, you can consistently come through for your customer.

Have a backup plan. When you are small, your orders are small, you will not have the luxury of being able to deal with many other suppliers on equal terms. You will need to work on a quality relationship with one that satisfies a particular need. When you are bigger, however, you will have to deal with several. Having an alternative supplier can ensure that you are getting a the best price possible.

Two very important aspects that I have left until last are flexibility and honesty. Flexibility, perhaps, goes without saying.  You need to accommodate the ways in which your business partners go about their business. But you also need to have the sense of when its time to change tactics or direction. Honesty. This is, over and above everything, most important. Be warned. There are more than enough tricky suppliers out there to make doing business more than a little difficult. But it is equally important that you be honest and up-front with a potential supplier from the start. For example you need to avoid overstating projected orders. For example, if you place an order for say 500pcs, but the final order you place comes in at 50% or even 10% or less of the original negotiation, this is not the way to promote an open an honest relationship with a supplier. I mention it because it happens frequently enough to be quite a problem. (This is often part of a customer strategy to pressure a supplier into giving them a better price, which I wont go into here). Remember, a tricky supplier will more than return the favor. Deal honestly and transparently with prospective suppliers from the beginning, and this will pay big dividends down the track.

Well, that’s one way to go about finding and selecting a supplier. The steps are simple, but the process is complex. The key to it is the development of the three ‘capacities’ mentioned at the outset. It is not so easy to find a good supplier. But following a procedure something along these lines should help in navigating what can be difficult waters. I would more than welcome readers’ comments on other ways of going about this process, experiences good or bad, or any variations on this theme.

Follow-up to this article.

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