Why the choice of supplier matters

1. A supplier's performance turns into the buyer's performance, because their late lorry becomes your empty shelf and their weak material becomes your faulty product.
2. AQA names three factors in the choice: price, quality and reliability, and a business weighs all three against what it sells and who it sells to.

Price

1. The price a supplier charges is a direct cost to the buyer, so a lower price cuts the cost of every unit the business makes or resells.
2. That lower unit cost can be passed on as a lower selling price, which helps a business competing on price, or kept as a wider profit margin.
   1. Aldi's low shelf prices depend on buying own-brand lines from suppliers at a lower price than a rival pays for a branded equivalent.
3. The price that matters is the delivered price per unit, so delivery charges, minimum order sizes and bulk discounts all have to be counted in.
4. Price is easy to compare, which is exactly why it gets too much weight: it is the one factor printed on a quotation.

Quality

1. The quality of what comes in sets a ceiling on the quality of what goes out, because no amount of care in the factory rescues poor materials.
2. Poor inputs create faults, and faults cost money twice: once in the wasted materials and staff time, and again in refunds, replacements and complaints.
3. Quality also has to be consistent, since a supplier whose materials vary from batch to batch forces the buyer to inspect every delivery.
4. Input quality matters most where the business charges a premium price, because a customer paying more expects the product not to fail.

Reliability

1. A reliable supplier delivers the right goods, in the right quantity, on the day promised, every time, without the buyer having to chase them.
2. An unreliable supplier stops production or empties the shelves, so staff and machines stand idle while wages and rent still have to be paid.
3. The customer feels the failure, not the supplier, so a Deliveroo restaurant that runs out of an ingredient loses the order and the review.
4. Reliability lets the buyer hold less stock, because a business that trusts its deliveries does not need to pay to store a large buffer.

Other factors a business weighs

1. Delivery time: a short wait between ordering and receiving goods means the business can react to a change in demand instead of guessing weeks ahead.
2. Capacity to grow with you: a supplier that cannot double its output will hold the buyer back if the buyer expands, forcing a change of supplier later.
3. Payment terms: being given 30 days to pay lets the buyer sell the goods before the invoice falls due, which eases pressure on cash.
4. Location: a nearby supplier can deliver more often and at shorter notice, while a distant one is usually cheaper per unit but slower to respond.

Why the cheapest supplier can cost the most

1. A low price only saves money if nothing goes wrong, and the costs of poor quality and late delivery are far larger than the pennies saved on each unit.
2. Which factor a business ranks first depends on what it sells: a discount retailer puts price first, a jeweller puts quality first, and a sandwich shop puts reliability and delivery time first.