Thinking About Securing a New Supplier for your Business? 5 Questions to Ask Yourself – and your Potential Supplier

If you’ve owned a business over the last five years or longer, you may be getting a sense of déja-vu: once again, small- and medium- sized businesses in Canada are facing supply chain challenges. Tariffs, geopolitical conflicts, climate change, labour shortages and cyber-attacks are all causing disruption today – and contributing to the notable 19% of B2B buyers who state they are currently struggling with supplier relationships. Such challenges can result in a shortage of materials, increased costs or delayed deliveries.

In response to past disruptions, many Canadian companies have adjusted their supply chain strategies –bringing on local suppliers, holding more inventory and expanding their network. Is it time for your business to pivot? If you’re thinking of changing or adding suppliers, there are a few factors to keep in mind. Here are questions to ask yourself – and new potential suppliers – to help guide your conversations and support a smooth transition to a more resilient supplier approach.

5 Questions to ask yourself before securing a new supplier for your business

1. How dependent are we on our current suppliers?

If you’re thinking of switching from an existing supplier, it’s important to evaluate how bound you are by current relationships. Here’s what to examine before making any decisions:

• Existing long-term contracts that may be difficult or expensive to break

• Exclusivity clauses that could prevent you from taking your business elsewhere

• Custom-built systems – such as proprietary technology or co-developed solutions – that tie you to your current supplier

• Specialized or optimized equipment to align with your current supplier, which may require you to retool should you switch

2. Are there risks to switching?

Knowing the “what ifs” is vital before making any business decision, and the same holds true if you’re thinking of switching suppliers. The following are considerations to keep in mind:

Reputational risk

Your business is built on your reputation, and the conduct of your suppliers plays a role in how you are perceived to your customers and other stakeholders. If a supplier’s ESG, labour or privacy policies don’t meet your standards – or your customers’ expectations – your reputation could take a hit.

Loss of relationship capital

Strong supplier relationships aren’t built overnight and over time you build goodwill – goodwill that could translate to flexibility, favours and problem-solving during challenging situations. Keep in mind, however, that a new supplier will likely be eager to win your business. When you switch to a new partner, make sure they are willing to above and beyond for you and could fulfill your needs if things don’t go as planned.

Unproven quality

When bringing a new supplier on board, you won’t be familiar with the quality of the product or the service they’re delivering. Consider asking for samples or mockups so you can test before you buy.

Cyber Risk

Suppliers can be a weak link in your cybersecurity chain. If their practices aren’t up to standard, your business may be exposed to breaches, data loss or operational disruptions. It’s essential to ensure any new partners meet your cybersecurity and asset protection expectations.

Loss of Competitiveness

Expanding your supplier base may inadvertently level the playing field with competitors – especially if you end up relying on the same vendors. Consider how this move could impact your ability to differentiate, and what your new competitive edge will be.

3. How long can we manage with our current supplier?

A recent RBC poll found that 70% of respondents confirmed they are now paying more to their suppliers in light of tariffs. Before shifting away from a supplier relationship that works, take some time to understand the impact of staying the course. Here are some questions you’ll want to answer:

• Even if their prices have gone up, is it still in your best interests to continue working with your current supplier, especially if you have a great relationship? Can you manage with higher costs over the short-term? What if costs stay elevated over a longer term?

• What are the external factors driving up costs? Would you face the same cost increases with another supplier?

• Are there ways you can adjust your product line to accommodate cost increases?

See how Audrey Brown, owner or Cocoa Bistro, has adjusted her product offering to cope with the rapidly increasing cost of chocolate.

4. Do we have the capacity to bring in new suppliers and have the right onboarding processes in place?

Adjusting your supplier network may not be as easy as flicking a switch. As you consider making a change, evaluate whether you have established supplier onboarding practices that can make for a seamless transition. If not, will you face delays in receiving deliveries and processing inventory?

Also, consider whether you have the technology and processes lined up that make it easy for a new supplier to work with you. If they face obstacles, they may not want to continue the relationship.

5. How diversified do we want to be?

What’s your game plan? Are you thinking of adding to your roster of suppliers, or simply replacing the ones that aren’t working for you? Diversifying your supplier base can bring both upside and complexity.

For instance, adding more suppliers can help you hedge against disruption. A robust supplier base can even offer negotiation leverage – if suppliers know they’re not the only ones being considered for a job, they may trim prices or offer other perks to gain your business.

On the other hand, do you have capacity to manage more relationships? Will it be more difficult to maintain alignment with your standards and values if you have more suppliers to manage?

Five questions to ask potential suppliers

To make an informed decision about adding new suppliers to your network, you want to learn as much as you can about them. Here are five questions to ask potential suppliers that can help you determine if they’re a good fit for your business:

1. Who are your suppliers?

You want to have a good sense of their supply chain – and the confidence that they have a good handle on their full roster of suppliers.

2. What are your ESG and sustainability practices – and how do your suppliers uphold them?

Do they have a supplier code of conduct in place that helps align their suppliers to their values? Further to this, how do they track for ethical sourcing and labour standards?

3. How do you handle disruption?

Ask if they have experienced disruption in the past and how they have handled it. You also want to understand how well-thought-out their contingency plans are. After all, just as you have to be nimble to accommodate disruption, you need your suppliers to be able to adapt too. Assessing their ability to adjust to changing conditions and customer needs is an important step.

4. What cybersecurity and loss prevention practices do you have in place?

Cybersecurity and physical asset protection is a big risk in supplier management – suppliers often have access to sensitive financial and business information, never alone your goods and future inventory. Weak links in their systems could give criminals a way into your business.

To that end, be sure to ask about their IT safeguards and employee training. Also, find out if they have been breached in the past. If so, how did it happen, how did they handle the incident it and what measures have they put in place to mitigate future risk?

5. What are your payment terms and contractual obligations eg insurance?

You may be enjoying favourable terms and rates with your long-standing suppliers. All suppliers are different, and it pays to understand the potential supplier’s financial terms and conditions. While negotiation hasn’t started at this point, ask them to share their base-line payment terms, insurance, shipping practices, and other processes that will affect receiving your product on-time and above board.

Bonus question to suppliers: Can you provide references?     

References can help you determine the quality of a supplier’s product and service. By speaking with other customers, you can learn best practices and tips for optimizing the relationship

Your suppliers are vital to the success of your business. Evaluating your current relationships – in light of tariffs, the geopolitical landscape and climate impacts – can help you continue meeting demand and the expectations of your customers.