Sourcing Your Inventory From a Single Supplier Vs. Several
by Carrie Hinkel on November 27th, 2007
Depending on the industry and the size of the company, a business may be better off buying all their products from one supplier or placing several orders with a variety of suppliers. There are plenty of issues to consider, and making the right choice could save your company lots of money and aggravation in the long run.
Sourcing inventory from a single supplier
This option won’t work for all retailers, but for those who carry industry-specific items or a limited amount of merchandise, it’s worth considering this type of wholesale buying. However, as you’ll see, there are both pros and cons to having a single supplier retail business.
Pros:
Convenient – Choosing products from just one catalog or website is a lot easier than trying to keep up with new products from a dozen or more wholesalers. You’ll certainly save a lot of time and effort by having your entire product selection choices in one place.
Quantity discounts – It’s a lot easier to get a bulk discount on merchandise when you’re buying your entire inventory from one supplier. Depending on the supplier, you could get a 2% -10% discount by placing your entire order with them. If you’re a small business, it’s doubtful you would even get a discount if you placed several small orders with different wholesalers.
Save on shipping – Shipping all your products from one place is a lot cheaper then having several small orders shipped to you from various suppliers. Shipping is expensive and, over time, all those charges can add up to some serious dollars.
Cons:
Limited products – It’s rare that one supplier would have ALL the products you’re looking for. So, that means your store may not be as fully stocked or your product line as extensive as you had hoped.
Risky – If your entire inventory relies on the one supplier, then what happens if they suddenly go out of business, their warehouse burns down, or they’re just plum out of stock on your merchandise? That leaves you in a very difficult situation.
Buying your products from several suppliers
Sourcing from a variety of wholesalers isn’t just for the big companies. With small minimum orders, wholesalers (and even some manufacturers) are making it easy for small companies to buy products.
Pros:
Product Variety – With an unlimited amount of wholesalers to choose from, you can freely pick and choose the products you want and expand your product lines, without having to be committed to a particular set of product offerings.
Lower Risk – If something happens with one of your suppliers, it’s not the end of your business because you have plenty of other product supply sources to choose from.
Cons:
High Shipping costs – It’s a lot more expensive to ship several smaller orders, rather than one large one. Shipping costs can quickly eat up your profit margins if you’re not careful.
Trouble meeting order minimums – If you’re only ordering one or two items from a particular supplier, it may be hard to meet their order minimum. This may mean having to buy more products than you really wanted or not being able to purchase a particular item.
High product costs – If you’re not buying your products in bulk from a single supplier, you may not end up qualifying for those nice larger quantity discounts.
As you can see, neither option is absolutely perfect but, that’s okay. You just need to understand the pros and cons of each so you can choose which is right for you and your company.