Key Suppliers - How to Build a Startup

Summary

The video script discusses the importance of key suppliers as partners in a business. It distinguishes between two types: those providing outsourced services, like accounting or manufacturing, and traditional suppliers who provide raw materials. The script emphasizes the shift from viewing suppliers merely as a cost to recognizing them as integral to resource efficiency and success. It encourages startups to build lasting partnerships with suppliers, moving beyond transactional relationships.

Takeaways

• 🔑 Key suppliers are crucial partners in a business, divided into two types: outsourced service providers and traditional direct suppliers.
• 🌐 Outsourcing can involve various company functions, such as accounting, sales, or specialized tasks like medical imaging analysis.
• 🏭 Examples of outsourcing include the shift of manufacturing lines to third-party companies, similar to Apple's relationship with Foxconn.
• ⚙️ Traditional suppliers provide essential components and raw materials, like iron and ore for steel production.
• 💡 Historically, suppliers were viewed merely as a cost, but modern business recognizes the value of a partnership approach.
• 🤝 A partnership with suppliers is based on mutual benefit, understanding that both parties need to succeed for the relationship to be sustainable.
• 📈 Efficient use of resources is enhanced through a collaborative relationship with suppliers, moving beyond transactional interactions.
• 🛠️ As a startup grows, it's vital to seek suppliers who can offer more than just a product or service, fostering a deeper partnership.
• 🔄 The script emphasizes the importance of looking beyond a simple checklist approach to supplier relationships, aiming for more meaningful connections.
• 📚 Establishing long-lasting relationships with suppliers can contribute to a startup's stability and growth over time.
• 🚀 For startups, treating suppliers as partners can be a strategic move that enhances competitiveness and innovation in the market.

Q & A

What is the first type of key supplier mentioned in the script?

The first type of key supplier is a third-party company to which part of the business operations, such as accounting functions, sales, or specific tasks like doctors looking at x-rays, are outsourced.

Can you provide an example of outsourcing part of a business to a third party?

An example given in the script is doctors looking at x-rays, which can now be done by trained technicians in India.

What is the second type of key supplier discussed in the script?

The second type of key supplier is traditional direct suppliers who ship components, raw materials, or sub-assemblies to the company.

How has the perception of suppliers changed from the past to the present?

In the past, suppliers were viewed merely as a cost to goods. Nowadays, they are seen as partners with whom a relationship is necessary for efficient resource use.

Why is it important to treat suppliers as partners rather than just a financial transaction?

Treating suppliers as partners helps in achieving the most efficient use of resources and ensures a win-win situation for both parties.

What is an example of a company that outsources its entire manufacturing line to a third-party company?

Apple is an example, as it outsources its manufacturing to Foxconn.

What does the script suggest startups should do as they grow?

The script suggests that startups should look for partners beyond just a checklist and establish long and lasting relationships.

How can startups identify potential key suppliers for their business?

Startups can identify potential key suppliers by assessing their need for outsourcing certain functions or sourcing raw materials and components.

What is the significance of the phrase 'more than just a checklist' in the context of the script?

The phrase implies that startups should seek suppliers who offer more than just the basic transactional services, aiming for a deeper partnership.

Why is it crucial for startups to establish long-term relationships with suppliers?

Establishing long-term relationships with suppliers can lead to better negotiation terms, more reliable supply chains, and mutual growth opportunities.

What is the role of key suppliers in the growth of a startup?

Key suppliers play a critical role in a startup's growth by providing essential services, materials, and support that enable the startup to focus on its core business.

Outlines

00:00

🤝 Key Suppliers as Partners

This paragraph discusses the importance of key suppliers in a business's ecosystem. It distinguishes between two types of key suppliers: those to whom certain company functions are outsourced, such as accounting or sales, and those who provide components or raw materials. The paragraph emphasizes the shift from viewing suppliers merely as a cost to recognizing them as partners essential for efficient resource utilization. It suggests that startups should seek suppliers with whom they can establish long-term, mutually beneficial relationships, moving beyond transactional interactions to a more collaborative approach.

Keywords

💡Key Suppliers

Key suppliers are critical business partners who provide essential goods or services to a company. In the context of the video, they are divided into two types: those to whom a company outsources certain functions, such as accounting or manufacturing, and traditional direct suppliers who provide raw materials or components. The video emphasizes the importance of treating these suppliers as partners for mutual success, rather than merely as costs, highlighting a shift in perspective from the past.

💡Outsourcing

Outsourcing refers to the practice of contracting out a company's operations or services to a third party. The video script mentions outsourcing as a way to delegate tasks such as accounting, sales, or even medical services like x-ray analysis to trained technicians in other countries. This concept is integral to the discussion on key suppliers, illustrating how companies can leverage external expertise to optimize their operations.

💡Third-Party Company

A third-party company is an external entity that provides services or products to another company. The script uses the example of Apple outsourcing its manufacturing to Foxconn, a third-party company, to illustrate how outsourcing can be a strategic move for businesses to focus on their core competencies while relying on specialized partners for other aspects of their operations.

💡Supply Chain

The supply chain encompasses all activities involved in the production and delivery of a final product, from sourcing raw materials to delivering the finished goods to the consumer. In the script, the supply chain is mentioned in relation to outsourcing sub-assemblies, indicating the importance of having reliable suppliers within this chain to ensure the smooth flow of materials and components.

💡Manufacturing Line

A manufacturing line is a process layout where products are produced in a sequential manner through different workstations. The video discusses the concept of outsourcing an entire manufacturing line to a third-party company, which is a strategic decision that can affect cost efficiency, production scale, and quality control.

💡Accounting Functions

Accounting functions involve the processes of recording, summarizing, and reporting financial transactions. The script mentions outsourcing accounting functions to third parties as an example of delegating non-core activities to focus on the company's primary business operations.

💡Sales

Sales refer to the process of selling products or services to customers. In the context of the video, sales is one of the functions that a company might choose to outsource, suggesting a strategic decision to focus resources on core activities while leveraging specialized sales teams from third-party companies.

💡X-rays

X-rays are a medical imaging technique used to visualize the internal structures of the body. The script uses the example of doctors outsourcing x-ray analysis to trained technicians in India, demonstrating how even specialized tasks can be efficiently handled by outsourcing to experts in different geographical locations.

💡Raw Materials

Raw materials are the basic materials used to produce goods. In the script, raw materials such as iron and ore are mentioned as examples of what traditional direct suppliers provide to a company for manufacturing processes. The quality and availability of these materials can significantly impact the production capabilities of a company.

💡Components

Components are individual parts that make up a larger system or product. The video script refers to components as items that direct suppliers ship to a company, which are then used in the production of finished goods. The reliability and quality of these components are crucial for the final product's performance and safety.

💡Resource Efficiency

Resource efficiency is the optimal use of resources to produce the maximum output with the least input. The video emphasizes the importance of treating suppliers as partners to achieve resource efficiency, suggesting that collaboration and mutual understanding can lead to better utilization of resources for the benefit of both parties.

Highlights

Key suppliers are an important type of partners for a business.

There are two types of key suppliers: outsourced partners and traditional direct suppliers.

Outsourced partners perform functions like accounting, sales, or medical services for the company.

Outsourcing can also include the entire manufacturing process, similar to Apple's relationship with Foxconn.

Traditional direct suppliers provide components and raw materials necessary for production.

Historically, suppliers were viewed simply as a cost to goods, rather than as partners.

Modern business practices recognize the importance of treating suppliers as partners for efficient resource use.

Building a partnership with suppliers goes beyond financial transactions to mutual success.

Startups should seek suppliers who view the relationship as more than just a transaction.

Establishing long-lasting relationships with suppliers is crucial as a startup grows.

Suppliers can provide more than just materials; they can be a source of innovation and support.

Outsourcing certain functions allows a company to focus on its core competencies.

The example of doctors outsourcing x-ray analysis to trained technicians in India illustrates the benefits of outsourcing.

Partnering with key suppliers can lead to cost savings and operational efficiencies.

Suppliers are not just a cost center; they can contribute to a company's competitive advantage.

A strong supplier relationship can enhance a startup's agility and responsiveness to market changes.

Mutual understanding and trust are essential components of a successful supplier partnership.

Startups should aim to find suppliers who are willing to collaborate and innovate together.

The transcript emphasizes the shift in perception from viewing suppliers as costs to valuing them as strategic partners.

Transcripts

So, the last type of partners are actually key suppliers. There are two types of key suppliers.

One which you actually outsource part of your company to a third party.

It might be your accounting functions. It might be some of your sales.

It might be something as simple as doctors looking at x-rays

are now done by trained technicians in India.

It might be part of your supply chain for sub-assemblies or you might outsource

your entire manufacturing line, which we used to have here in the United States

to a third-party company much like Apple does with Foxconn

or your key suppliers might be traditional direct suppliers.

They simply ship your components, raw materials, iron, and ore for you to make steel, etc.

In the old days, we used to think of suppliers as not a partnership but just simply a cost to goods.

Nowadays, we understand to get the most efficient use out of our resources,

we really need a relationship that treats them like partners.

We both need to be in this to win.

We both need to understand that this is more than just a financial transaction.

So, as your startup grows, start looking for partners where you are more than just a checklist

and they're just more of a source of material and try to establish long and lasting relationships.