Beyond the Spreadsheet

Whether you pursue a small niche or the broad mass market, there are few decisions more vital than choosing your merchandise suppliers.

Often businesses treat sourcing as an arm of product development; something to be simply spreadsheeted out by a team of analysts who report back to managers on which suppliers will be best for the lines the company plans to offer.

That’s not to say a spreadsheet won’t come in handy, but it’s no substitute for digging deeply to figure out what you need from your suppliers and what they can do for you.

First and most importantly, define the critical factors that will make your company successful. Hint: If your answer is price, quality and service, you aren’t digging deep enough. Instead, ask this: “For product X to succeed, what does it need to do extremely well?” Your supplier criteria should unreservedly mirror these things. Most of that criteria will probably be versions of price, quality and service, along with an “other” category in some cases. But take the time to distill them to specifics.

For example, in my experience in co-launching a fair trade apparel catalog, we decided quality criteria included expertise in ultraconsistent fit control, which is more important than it is for a store retailer. We also needed access to fabric that could be communicated in written words rather than through touch. For example, Pima cotton communicates softness.

While it’s critical that your supplier works with lower minimum order quantities if you’re a small business, it’s less important for your supplier to chase fashion trends quickly because this isn’t a competitive advantage for the company. The “other” criteria in this case are fair trade standards of worker living wages.

Since price will never be the primary reason for market success in this business, don’t include it on your supplier search radar. A fair and reasonable price is of course important, but don’t lead with it or you’ll divert the supplier search away from what’s truly important to succeed.

Standardize Criteria
Methodically standardize your criteria. These criteria should be designed to shed light on particular behaviors and processes, not to simply elicit yes/no responses. Here’s an example:

Don’t Ask: Does the supplier have a quality inspection system?
Do Ask: How many full-time auditors are on its staff per 100 production workers?
Do Ask: What kind of auditing is done at each stage in production? Have the vendor describe it in full detail. Request to see examples of auditing reports.

Once you’re armed with the right questions, call everyone you know who may know something about the potential supplier. You’ll be surprised how connected you are after making just a few calls.

In addition to your standardized criteria, ask each potential supplier these questions:
1. What is the one thing that really sets you apart from others in your business?
2. If you had to pick just one product to make, what would it be?

Try to get at what the supplier is really good at and whether it aligns with your critical success factors.

Next step: Get references from the supplier’s current clients. Dig vigorously for any potential trouble spots. Make sure any of the supplier’s weaknesses don’t undermine what’s important to you. It’s easy to unearth a supplier’s strengths because they’re usually on display during a prospecting call. So spend enough time looking for suppliers’ limitations up front, because it’ll get ugly if these emerge later.

If you’re starting from scratch and your phone calls to colleagues and friends don’t yield many leads, there are some excellent online resources available. One notable one is Panjiva.com, which rates more than 40,000 suppliers, mainly in the apparel and accessories areas. In addition to using supplier- and customer-reported data, Panjiva uses data from third-party sources, such as U.S. Customs and various certifying organizations. This enables it to give ratings on a whole range of criteria, from quality to customer loyalty to social responsibility and more.

It’s easy to be blinded by love and to bark up the wrong tree. At times a supplier will look like a dream come true in terms of responsiveness and track record, and will even produce great references. However, you don’t want it to produce what it has done in the past, but something similar. Watch for verbal and nonverbal clues that indicate you might be pushing the envelope for it.

Demand Samples
Consider this apparel example: You may find a shirt maker that you like on every level. It makes men’s shirts, but you really need women’s shirts. When you ask about this, the vendor uses the phrase “we could” or “that should be no problem.” These answers are your cue to do more homework. Have the vendor make some samples. Lay out your concerns head on, and ask the vendor to address them point by point.

Another common mistake is often referred to as “loving a supplier to death.” When a brand-new supplier executes flawlessly, it’s a very happy day. Your natural inclination is to reward its good performance with more business. But be careful — it’s not uncommon for a supplier to go from superstar to problem child in a matter of months by being overloaded with new product development.

In one case I recall, an apparel company was ecstatic with the performance of a new supplier that produced three styles, exceeding expectations on all levels. The next production season, this supplier was “rewarded” with orders for 20 new products, but failed spectacularly. Be good to yourself and your new star supplier by developing business deliberately.

Finally, once you’re using a supplier regularly, keep the relationship healthy by sharing more than just sales figures and inspection reports. Intimate details can be very powerful tools to reward or change performance.

For example, a handwritten letter from a disappointed consumer can be much more poignant than a spreadsheet showing an unacceptable quality fallout percentage for a shipment. Share the glowing customer letters, too. People on the front lines at the factory will love to see that their hard work is appreciated not just by your business, but also by real-life people who buy the merchandise.

Rob Behnke is co-founder and head of merchandising and sourcing for Fair Indigo, a fair trade apparel cataloger based in Madison, Wis. He previously worked at Lands’ End, Duluth Trading Co. and Macy’s. You can reach him at (608) 824-8974 or rbehnke@fairindigo.com.