Working with Suppliers & Procurement
What Procurement Actually Is
No business makes everything it sells from scratch. A Greggs bakery buys flour, yeast and sausage meat from suppliers. Nissan’s Sunderland car plant sources engines, steel and more than 30,000 separate components from over 200 suppliers. Even a small café needs someone to deliver the coffee beans. The job of finding, ordering and receiving these inputs is called procurement.
Procurement is not the same as shopping. It is a structured business function that has to balance price against quality, reliability and speed. Get it right and the business has the right inputs, at the right price, arriving on the right day. Get it wrong and production stops, customers get a poor product, or costs spiral out of control.
The Four-Step Procurement Process
OCR frames procurement as four clear steps. Imagine a small UK bakery, Harbour Loaf, preparing its Monday order.
Step 1 — Identify the goods and services to buy. Harbour Loaf checks its weekly production plan and its current stock: 120kg of strong white flour, 15kg of butter, 2,000 paper bags, plus an electrician to service the ovens. Identifying need accurately matters — ordering too much ties up cash; ordering too little leaves the shelves empty.
Step 2 — Choose the supplier. For flour, Harbour Loaf could buy from a national wholesaler like Bako, a regional miller like Shipton Mill, or a supermarket at retail price. Each supplier is weighed on price, quality, reliability, delivery speed and payment terms.
Step 3 — Order the goods and services. An order is placed, usually through an online portal, by email or over the phone. Modern businesses use EDI (electronic data interchange) systems that automatically send orders when stock drops below a set level.
Step 4 — Receive the delivery. When goods arrive, staff check that the right quantity has turned up, the quality is correct and nothing is damaged. An invoice is processed and the supplier is paid on the agreed terms.
The four steps of procurement are: identify what to buy, choose a supplier, place the order, and receive the delivery. Learn all four in the right order for questions about the procurement process.
Choosing a Supplier — What Matters
Step 2 is where most of the judgement happens. A supplier is not just a source of goods — they are a long-term business partner. Five factors drive the choice.
- Price — the obvious one. The cheapest is not always best, but input prices feed directly into costs and profit margins.
- Quality — poor inputs lead to poor outputs. A bakery using cheap flour ends up with flat loaves and unhappy customers.
- Reliability — does the supplier deliver on time, every time? A missed delivery can halt production or leave shelves empty.
- Delivery speed — can the supplier turn an order round in 24 hours, or does it take two weeks? Speed matters most for businesses with short shelf-lives (bakeries, florists) or fast-moving stock (fashion retailers).
- Payment terms — how long does the business have to pay? A 60-day credit term effectively gives the buyer an interest-free loan and helps cash flow.
Single Supplier or Multiple Suppliers?
A business can buy everything of one type from a single supplier or spread orders across several. Using one supplier often wins a bigger bulk discount and builds a close relationship — but leaves the buyer exposed if that supplier has a problem. Using multiple suppliers is more work but reduces risk. Tesco famously uses over 1,500 British farmers for its fresh produce: no single farm going under can empty a shelf.
The Impact of Logistics and Supply Decisions
Once a supplier is chosen, logistics (how goods move) and supply decisions affect the whole business. OCR names five impact criteria.
Time — how quickly inputs arrive. Fast delivery lets a business hold less stock and react quickly to customer demand.
Length of supply chain — short chains (a local miller delivering to a local bakery) are easier to manage and monitor. Long chains (electronics made in Taiwan, shipped through the Suez Canal to a UK port, trucked to a warehouse) are cheaper per unit but fragile. The 2021 Ever Given grounding in the Suez Canal held up an estimated $9.6 billion of goods for every day it lasted.
Reliability of supply — the 2021-22 global semiconductor shortage forced Nissan to cut UK output because chips the plant needed were not arriving. Reliability, or lack of it, can shut a factory.
Costs — transport, handling and storage all add to the final cost of an input. A cheap flour delivered three hundred miles might end up costlier than a slightly pricier local option.
Customer service — if suppliers fail, customers notice. Empty supermarket shelves during 2020-21 lockdowns showed how quickly supply problems become customer-facing problems.
Logistics and supply decisions affect time, length of supply chain, reliability, costs and customer service. The longer the chain, the cheaper per unit — but the greater the risk when something goes wrong.
Supply Chain Disruption in the Real World
Two recent events show what happens when the supply chain breaks. The 2021 Ever Given incident blocked the Suez Canal for six days, delaying hundreds of UK-bound ships. The 2021-22 global semiconductor shortage meant car makers, including Nissan Sunderland, paused production lines because they literally could not get the chips that modern cars need. Both events pushed UK businesses to rethink how far their supply chains stretch and whether holding more stock, or using closer suppliers, would protect them next time.