Preferred suppliers are approved by companies and are the first choice for services. They must have a good reputation, be licensed and insured, and meet the company’s business practices. Companies may ask for concessions and may enter into preferred supplier agreements. The purchasing department manages relationships with preferred suppliers.
A preferred supplier is a supplier who has been reviewed by a company and approved. When a business needs services, they look to these providers first, which means being on the preferred list can put a business in a strong position. As a general rule, only really large companies and institutions use preferred providers, and people need to apply to access the preferred program.
There are several qualities a business looks for in a preferred supplier. Reputation in the industry is certainly important, as are issues such as on-time performance, reasonable costs, and high-quality products and services. Suppliers must also be fully licensed, bonded and insured, as applicable, with ample evidence of certification and experience in their area of expertise.
Business practices at a supplier can also be important. A company that wants to promote sustainability, for example, will only use suppliers with verified environmental practices and a demonstrated commitment to environmental stewardship. Similarly, a religious company may prefer to use vendors who share its religious beliefs.
Many businesses also expect some concessions from preferred vendors. By adding a company to a preferred list, a company asserts that this will be its first source for goods and services and that it will not look elsewhere unless a supplier can provide the necessary services. In return, a company may ask for vendor discounts and other special treatment, as the company sees itself as a very important customer.
Some companies enter into what is known as a preferred supplier agreement, a contract between a preferred supplier and the company that is intended to spell out the terms of the relationship. Having such a contract can be a great idea, as it ensures that everyone understands what expectations are and can lay the groundwork for legal recourse if a problem develops. This type of contract must be read carefully by both parties to confirm that there are no surprises in the terms of the contract.
The purchasing department often manages relationships with preferred suppliers and has a supplier list that it distributes to other departments. When people need something, they need to see if a vendor on this list supplies it before looking at outside vendors.
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