Before paying suppliers, make sure you have protection policies in place against any damages, faults or quality issues with goods. If any issues come up, you’ll be able to get your money back. There are several ways to protect your finances and manage quality control:
Choose a safe payment method
Depending on your circumstances, you may want to consider a couple of payment options. The first is cash in advance, which means a supplier can avoid credit risk because payment is received before the ownership of the goods is transferred and is done through wire transfer or credit cards. But this could put a strain on your cash flow. Plus, you’ll likely be worried that if you pay cash in advance, you might not ever get the goods delivered. So, that’s money lost and customer orders that could go unfulfilled, which means you could lose your loyal customers and their repeat sales.
The second and arguably safer option is a letter of credit (LC). This is a promise from a bank on your behalf that payment will be made to your supplier as long as the terms and conditions within the LC have been met and verified through all the necessary documents. You pay your bank to render the service and an LC protects you as there are no payment obligations until the goods have been shipped by the supplier.
Set product quality rules
Defining what product quality means to your business is a subjective experience and you shouldn’t define anything lightly. Ask your wider team for their input and have open conversations with suppliers. Some questions to ask everyone involved are:
- Problem-solving: Does the product solve a specific problem and to what extent does it fix the problem?
- Functionality: How easy is the product to use? Is it complicated or does it take only a few seconds to figure out what it does?
- Design: Does the product look cheap or high-quality based on its aesthetics? Are the colors and dimensions accurate?
- Specificity: Is the product tailored to our customers’ needs? Has it been customized or is it a one-size-fits-all solution?
Source from multiple suppliers
Like we’ve said, investing in product samples is a solid try-before-you-buy tactic. But you can reduce your risk significantly by sourcing from multiple suppliers. This is especially useful when you’re looking for bespoke products and you aren’t 100% confident in a single supplier’s ability to meet your requirements.
Having more options means you can filter out organizations that are underperforming and focus on the suppliers who are providing the biggest return on investment. It can also make your supply chain more resilient and reduce losses if you work with suppliers in countries where there is political conflict, worker disputes or other issues that could halt production of your goods.