Supercharge your start-up supply chain

A super-efficient supply chain is a vital part of success for a start-up selling products.

Read our expert advice on managing a successful supply chain.

A supply chain, the term used to describe the system of supplying a product to a customer, is an essential process that start-ups need to get right.

There will be several elements and different businesses involved in your supply, so planning, preparation and efficient systems are vital.

There are many examples of businesses achieving colossal success by operating a streamlined supply chain.

One of the most famous is technology giant Apple which uses just-in-time (JIT) manufacturing.

JIT is a process that means businesses produce a product once it has been ordered rather than having lots of products already assembled waiting to be purchased.

By operating one central warehouse in the US and developing strong relationships with contract manufacturers worldwide, Apple can launch, manufacture and ship millions of iPhones very quickly.

This has kept costs low and profits high.

An effective supply chain is essential, no matter the size of your business.

It allows you to quickly get your products into customers' hands without unnecessary costs such as warehouse storage.

What is a supply chain, and why it is important?

A supply chain is the system of organisations, people, activities, information, and resources involved in supplying a product to a consumer.

An effective supply chain is critical to start-ups, especially as they start to scale and meet growing customer demand.

There are many steps to getting a product to a customer once it has been ordered.

Organisations that can be part of the supply chain include manufacturers, logistics companies and transportation firms.

Getting the process right and dealing effectively with all those involved can make a difference between success and failure.

Negotiate poorly with your suppliers, and your costs will be high and eat into your profits.

Choose unsuitable suppliers and customers may receive an inferior service that damages your business' reputation.

Managing a supply chain

Finding suppliers

With thousands of suppliers to choose from, it can be easy to pick the wrong one for your business, so it's wise to use trusted sources.

Friends, family or other business owners who you know well may have recommendations, while trade associations and business support groups often have lists of approved suppliers.

You can also visit exhibitions and trade shows once Covid-19 restrictions are lifted or read media publications relevant to your sector.

Create a shortlist of suppliers which you believe can deliver what you want.

Approach the suppliers with a clear brief outlining your requirements.

Compare their responses and decide which to speak to about agreeing on a contract.

You might also want to carry out credit checks and ask for testimonials from some of their existing clients.

Enrol in our free Project management course as part of our Learn with Start Up Loans partnership with the Open University.

Negotiating prices and agreeing on terms

The key to negotiating a good deal with your chosen supplier is being clear on your priorities.

Decide what's most important for your business, such as price, customer service levels and payment terms.

If you're dealing with overseas suppliers, you'll also need to consider delivery and lead times.

Be confident about what you want and ask the supplier for a price. If it's too high, make a counteroffer.

The negotiations will likely result in a revised offer. Make sure you're clear about what the price includes before accepting it.

Read our guide to successful negotiation tactics.

Once a deal is agreed, draw up a service level agreement (SLA). This should cover:

• The responsibilities of both parties.
• The service that the supplier must deliver.
• Metrics for how service levels will be measured.
• Delivery schedules.
• Payment terms.
• The process for resolving disputes.
• Penalties to be imposed should the agreed service levels not be achieved.
• Conditions for terminating the contract.

Some suppliers may require you to agree to a standard company SLA. If so, make sure you scrutinise it thoroughly and identify any risks to your business. If it's too risky, you may need to look for another supplier.