4.24.2012

Dealing in Multiples- Are multiple suppliers better than one?

As I've continued to develop my business and  think about ways in which I'd like to grow, a key issue that I keep coming back to is who to work with. Is it wise to stick with one supplier (which in my case would be a developer since my main product is a software application), or to diversify my network and work with others?


There are strong arguments for both approaches. Sticking with suppliers you know enables you to build relationships and trust. Suppliers who have a relationship with you are more likely to be honest and go the extra mile to keep your business.

So what's the downside? Familiarity sometimes leads to complacency. When a supplier feels that you're stuck, they may start treating you like you have no other options. Additionally, working exclusively with one supplier creates the risk of the supplier gaining too much knowledge about the inner workings of your business model and possibly using this knowledge to create competition.

The solution to this is knowing your supplier, knowing your business and above all knowing where to find balance. Some important questions to ask are:

1) How big is your business and how feasible is it to rely on the services of one supplier?

2) How specialized are your requirements and do they require confidentiality?

3) What does your supplier have to gain by failing to maintain their relationship with you?

So how do you know when you're right? There's no set answer but in my own experience, this has come to fruition through the creation of a relationship with a supplier with whom I share a mutual network of friends, who also has a strong passion for his work and with whom I've agreed to binding contractual terms.

How have you interacted with your suppliers? Share your stories




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