What is an approved supplier?
An approved supplier is a vendor of a certain product, or line of products, which a company has approved its employees to purchase from. An approved supplier often has to go through a box ticking and pitching process to be placed onto an approved supplier list. Winning a place on a company’s approved supplier list can be highly beneficial to both parties involved. The supplier should have consistent purchases that are over and above what they would usually expect to achieve without being on such a list. For the company with an approved supplier list, they should enjoy lower costs as a reward for giving the supplier repeat custom.
How does an approved supplier work?
An approved supplier agreement will work according to the terms and conditions that both sides are happy with. To that end, within a contract setting out the obligations of both sides, it is important for both parties to negotiate terms that are beneficial to both of them. An approved supplier can therefore set out the prices they are happy to sell a product for, while also setting out how many products a company must purchase as minimum to receive those reduced rates.
The company must also ensure that the service, as well as the products they are receiving, is better than they would expect without an approved supplier. In that way, they can stipulate how quickly products must be received, as well as ensure that the amounts the approved supplier may suggest are workable for them.
Advantages of an approved supplier
As briefly mentioned above, the advantages of an approved supplier arrangement can benefit both sides of a contract. The approved supplier should hopefully enjoy a more profitable arrangement than would have been seen without such a contract, while a company using the supplier should see their costs decrease - thus increasing their profitability too.
While those advantages are obviously very important, it is what transpires from those advantages that are key too. Approved suppliers can often mean an improved relationship that can then strengthen future business on either side. That can then have further positive ramifications for both parties. For, if a company has a better supplier who provides them with what they need at a cost they can afford, they in turn can help service their customers better. For the supplier, they have more income and thus an improved cash flow. An improved cash flow can help a business run more efficiently and effectively.
Contractbook and approved supplier
When starting to work with an approved supplier, it is important to get the terms and conditions of your agreement into writing. We can help you create an approved supplier template contract so that you can start negotiating on those terms as soon as possible once you have found an entity you want to do business with. Using one of our templates and our software is a great way of minimizing the administrative burden that generating a contract can be, while also ensuring accuracy and reliability.