One of the best feelings in business is expansion, specifically the opening of additional locations or stores. Having the capital and resources to expand is a great sign that your business is functioning as it should and that everything is going well.
However, there are some important decisions that have to be made as a part of this expansion. Will you be using the same high-quality business supplier for your new location, or will you attempt to diversify? Let’s look at a few reasons why choosing different suppliers for multiple locations can be a bad idea.
Different Suppliers Can Lead to Product Inconsistency
Having multiple suppliers can lead to inconsistent product quality. For example, imagine a restaurant with multiple locations that uses different suppliers for beef. At their downtown location, their hamburgers use fresh ground beef from a local farmer. However, their locations in the suburbs use mass-produced frozen patties.
Once word-of-mouth gets around that the burgers downtown are made using superior meat, sales in the suburbs will decrease. Additionally, customers who eat in the suburbs and don’t like the frozen burgers will be less likely to try the fresh ones downtown. Customers shop at chains for consistency and knowing that everything will be the same no matter which location they choose.
Pricing and Negotiation Power
Having multiple suppliers also reduces leverage in contract negotiations. By using the same company to supply multiple stores, businesses can secure lower rates, volume discounts, and other benefits through increased leverage. These can significantly reduce costs and increase profit margins.
The reason for this is that the suppliers’ costs will be reduced by streamlining their process, especially if a majority of these deliveries are going to a central location instead of each store. Either way, however, your cost per unit should decrease.
Potential Paperwork and Invoicing Issues
Using multiple suppliers can also be a problem for your accounts payable department. By increasing the number of external companies to whom you owe money, you introduce more potential points of failure and opportunities for mistakes or delays.
If all your locations use the same supplier, it’ll be easier to keep track of deliveries, payment dates, and more. That’s not to suggest your accounts payable department isn’t doing a good job, of course, but simply an acknowledgement that as the number of separate companies increases, so does the potential for human error.
Potential Communication Issues
Working with different suppliers can also create communication issues. You’ll have to deal with multiple customer service agents at multiple companies, which can be a real hassle (especially if an emergency situation arises and you frantically need to call all four). By using the same supplier, the communication is streamlined, and you only need to deal with one person at one company.
Final Thoughts
Not having the same supplier for businesses with multiple locations can be a real hassle, with many potential problems like communication issues, higher rates, less leverage during negotiations, and more. By choosing one supplier for all locations, you can streamline the process and reduce potential headaches.
