Sunday, November 16, 2008

Basic Sourcing Information

As my readers will know by now, I have been putting together a wine making kit to sell on my store. I have been working on this for a while now, at least a month, I'm not positive how long (I should probably pay attention in the future) but I have met a couple of delays. These delays could have been lessened if I had developed a better sourcing strategy.

A sourcing strategy sounds like a big term, meant for bigger businesses, or eat least larger small businesses, not a dorm room business. A dorm room business is just purchasing, right? Buy products and then sell them. Well how are you going to choose what to buy? How do you choose where to buy from, or how many you'll buy? That's a sourcing strategy; it doesn't have to be the incredibly complicated procurement systems some companies use.

I needed a few products for my kit, and my ultimate goal was to find the most cost effective products that would still provide quality for my customers. If my customers purchase products that are of low quality because I decided to only go for cheap products, that reflects poorly on me. No one cares if I tell them "oh, my supplier messed up" because to them, I messed up. Think about it, if your supplier got the product from someone else, you don't care, if your product fails, you have issue with your supplier.

I did quite a bit of searching on the Internet. First, however, I developed a list of products that make home wine making easy, and then a list of items that are required for home wine making. These required products are the ones I chose for my kit. Some products make things easier, but they are not required, and thus would be stuff my customer does not need. So, my product development strategy was to develop a bare essentials product that was quality, but cost effective. I had a target price in mind, $10 for the kit, so I knew about what I could pay for the different parts of the kit.

So, on to sourcing; I knew what I needed to get, so I found the lowest cost suppliers I could find. I had it narrowed down to about 4 different suppliers for the least expensive products. I then eliminated those suppliers that did not have everything I needed, even if the products were not lowest cost. Something to remember is that with low volumes, shipping cost can be a major deal breaker. I had thus narrowed it down to 2 suppliers, which I was ok with; 2 suppliers to put together these kits. I was fine with it until I got a shipping quote at $18, on about $40 worth of products. Back to the drawing board.

I did a cost analysis (adding together my costs per kit) of using just the one other supplier, and it wasn't great, but I thought I might have to do that. Then, a few more Internet searches, and I finally found a company that had EVERYTHING I needed, and at the lowest prices. I have no idea how they were able to do this, but everything was a quality brand, so I purchased everything from them.

I did not think it all through, however, because I ordered 30 1 oz. doses of a liquid sanitizer (BTF Iodophor) which is required, and I received 7 4 oz. doses, and 2 1 oz. bottles. That did not work, so I talked to them, and they told me to send them back, and they would re-bottle them for me. I sent them all back (except the 2 1 oz. bottles) and got 28 1 oz. bottles back. The problem...the bottles they use leak. Iodine stains, and is nasty stuff, so I decided to change my product. It cost me more, and I COULD use the Iodophor, but I decided my customers would not like products that could leak all over everything.

I knew there was one supplier (Mr. Beer) that sells affordable, one-step powdered sanitizer. I bought 25 of those packets, and it comes out, with shipping, to about the same price as I was paying, so I'm ok. I'm currently waiting for the products to show up, but I think I'm going to put up the wine kits on the store once I get a shipment confirmation from Mr. Beer, so I can start advertising.




That was a long story just to make a few points, so I'll try to bullet-point the important stuff.

  • Develop a product plan
  • Figure out exactly what you need for your store or product
  • Develop a list of potential suppliers, google is your friend for this
  • Look for overlap, where suppliers can supply a large portion of your store
  • Do a total cost analysis (Cost of product, plus tax, shipping, etc.)
  • Develop a list of 1-3 suppliers, and commit.
  • Remember, you might save money on shipping per unit by buying in bulk, but don't forget about your personal storage abilities (ex: A dorm room cannot store large boxes of shirts)
  • Make your purchase, and be excited to have stuff to sell
  • Be ready to adapt in case something does not work out.

I hope those are some helpful points. If you have any questions about this process, PLEASE feel free to contact me using the contact button on the right.

Also, remember, if you would like to submit a guest post, I am still accepting them. I love to get other points of view out there.

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