The economic dependence on suppliers is a very hot topic that affects many companies in all sectors. This is a situation where a company inadvertently finds itself unable to find a supplier that offers the same product or service as its main supplier.
Few suppliers can be an advantage: higher order volumes to negotiate discounts, privileged relationships with a small number of loyal partners to build trust and partnership… But as we will see, the risk of being completely dependent on suppliers can damage the sustainability of a company and affect your sales.
We will also discuss solutions to this situation by diversifying your supply solutions.
What are the risks of economic dependence on suppliers?
Weakened bargaining power
First, vendor dependency. Reduce the possibility of negotiation. In fact, it avoids bidding, which is a key lever for lowering prices, making extra profits, or simply breaking a deadlock when suppliers stall.
Supply difficulties in a conflictive global context
It can also lead to over-reliance on a single vendor. Supply is difficult.
As we have seen in recent years, the situation in Asian countries is very volatile due to the COVID-19 crisis.
In 2022, the war in Ukraine and the resulting inflationary trends will have a significant impact on many supply chains in these countries.
Overreliance on a single supplier can lead to supply difficulties.
When we know that approximately 1/3 of the manufacturing plants are located in China, we understand that the current restrictions and restrictions in the country are putting a strong pressure on the production and export of goods.
All of these interruptions put your supply of basic products at risk. If you have an e- commerce site with products or items from Asia, or even a dropshipping site, you will definitely experience delivery delays or even cancellations.
E-commerce giants like Amazon have known how to anticipate and find alternative solutions by diversifying their supply factories, thanks to the almost unlimited human and material resources that their economic resources give them.
But for smaller e-commerce operators, suppliers are often concentrated in a region of the world where the supply chain is difficult to navigate.
How to diversify your supply solutions?
Completely rethink acquisitions
During the initial sourcing of the products you offer in your e-commerce, it is possible that similar products offered by other suppliers do not yet exist.
You can relaunch the offer in the current market to find suppliers that meet your needs.
You can also offer your specifications to suppliers who offer a similar product and who can use and adapt your production line to manufacture their products.
Obviously, this will be an opportunity to renegotiate prices, as well as the conditions of production, delivery…
feel free to expand your search to different geographical areas also locally, and locate production in different factories so as not to be blocked in the situations that we have seen in particular with China.
play in need
Sometimes the supplier of a product really does have a monopoly because the product is so specific.
Product specifications can be revised and adapted. This will allow interviewing different suppliers who will be able to meet the demand both in terms of products and with a view to optimizing all costs.
The costs and risks of changing suppliers
However, this phase of sourcing and competing with suppliers comes at a cost. The financial cost of establishing the production and supply chain can be seen as an investment.
The cost of uncertainty in a new supplier relationship can also be significant. It is not known, in fact, if the security of supply will be maintained during the transition period and if the promises made will be fulfilled.
conclusion
Ultimately, it will be the benefits you get from having multiple vendors for each service or product you need. benefits that will be worth it and may even be vital to your business for its stability and its value at the time of sale.
If you want to sell your eCommerce site, you’ll need to have made it profitable to diversify your vendors and have proven your relationship with them over a significant period of time.
