If you're on the search for a new bulk oil supplier, there's some basic questions that you'll need to ask. These inquiries will be your basic introduction, but will actually build your foundation for years of a good working relationship.
The answers to these questions will be a vital part of choosing who you want to work with, how you're going to partner together and if they're going to be able to take care of you in times of need.
In fact, these questions are so important that if you're already buying bulk oil from a supplier and you forgot to to ask a few of these questions, you'll probably want to go back and ask anyways.
This will help you be fully prepared to partner together-- the more you know now, the better.
Here's everything you should be asking your suppliers (whether you've worked with them for years or not).
The 8 Most Important Questions For Every Bulk Oil Ingredient Supplier
1. Do you have a minimum order?
Most suppliers have a minimum order. Depending on the industry that your supplier serves, it could be one case, one pallet or one truckload. As a buyer, you'll need to know what their minimums are to understand if:
a) you're working with the right type of supplier for your type of business, and
b) to make sure you order enough in the future.
These minimum orders are put in place because of efficiency reasons for your manufacturers' own warehouse. For example, if it takes them one hour to set up their production line, they're not going to want to fill just one case in that time before they shut it down again.
These minimums help them keep their prices as competitive as possible for you.
2. Do you have a volume discount, and where are the price breaks?
Many suppliers offer a price break for ordering more volume. The more you buy, the more you save. Why? It's not just about rewarding those who buy more. In fact, larger orders allow their warehouse to work in more efficiencies which saves them money. When they save money, you save money!
They key for you is going to be finding out where these price breaks are and seeing if you can take advantage of them by re-arranging or consolidating your orders.
3. What will my total costs be?
The total costs are the most important price you're doing to get. That's what actually matters to your business-- it's the amount of money that will come out of your pocket and go towards your ingredients. An oil can be really competetively priced, but if you have to add in an astronomically high shipping rate, your costs are not all that cheap anymore.
Ask for an FOB cost at their dock, and then get an estimate for the shipping. Once you put those two numbers together, you should be good to go!
Once in a while, some suppliers will have extra fees for things like pallets, packaging, labels, or handling fees. Make sure you ask for the total cost of a potential order and get all of these "extras" out in the open before you place your order.
4. What are my payment terms?
Many suppliers offer credit terms, if you quality. These terms may be 15, 30 or 60 days depending on the standard in your industry. This means that, for up to a particular dollar amount, you will be billed for what you ordered and you'll get to pay later. For example, if you have terms of "$50,000, Net 15", this means that you have 15 days to pay for your order after it ships. However, your order will have to be under $50,000, or if it isn't, you'll have to prepay some of that cost.
Other suppliers may require cash on delivery (COD), or prepayment with a check, wire transfer or credit card before you order. Just have that conversation from the get go, so you know what you can expect and when you'll have to pay.
5. Under what circumstances will my prices change?
In the bulk oil world, prices are always changing because most of the products are commodities. You can expect that your rates will change over time. How often though? That depends on the oil, how much you buy, and the market.
Talk to your supplier about what kinds of market changes will make your price go up or down. Ask them as many questions as possible to learn about the commodity market for that oil, so you know what kinds of fluctuations you can expect.
6. When do I take ownership of this product?
Some suppliers have you take ownership when the product leaves their docks. Other times, you don't take ownership of a bulk ingredient until it delivers at your door.
The easiest way to tell is to ask your supplier what the FOB point is. The FOB point is the point where the ownership of the product transfers. If it's FOB your supplier, you take ownership of the product when it leaves their doors. If it's FOB your docks, it's their responsibility until it safely arrives to you. The standard in the bulk oil industry is FOB your supplier.
7. Can you give me a liability insurance certificate?
Any bulk oil supplier should be able to provide you with a liability insurance certificate. This insurance is something that can protect your business in the event that there is a product recall or other issue. It's important that you get proof of insurance from any supplier, in every industry you buy from.
Make sure that the limits are adequate to meet your needs: $1,000,000 in liability is the general standard for suppliers who work with food manufacturers. Also, ask for an updated copy each year.
8. What is your full product line?
Many times, you may be so focused on the product that you're desperate to source that you may not think about other products this supplier would be able to help you out with until later. Perhaps they offer different oils that your R&D team has been working on, or they could stand in as an alternative supplier for a different oil category in times of need.
It's a good practice to always ask for their full product line when you begin conversations, so that you can keep it on hand. Do a quick review to see if there's any other oils you should ask for quotes on in the future.
Key Takeaways For Purchasing Managers & Business Owners
Make sure you ask your current and potential suppliers as many questions as possible. It will keep both parties happy, and will avoid any confusion in the future.
Asking the right questions will also help keep your business prepared and protected. You don't want to get into a pickle later because you didn't ask enough questions now!
If you're new to the purchasing process, we also recommend reading 11 Steps To Purchasing Bulk Oil Ingredients For Manufacturing. And don't forget, here's the list of questions you should be asking. You can copy and paste this list into your notes, to make sure that you don't miss a thing.
- Do you have a minimum order?
- Do you have a volume discount and where are the price breaks.
- What will my total costs be?
- What are my payment terms?
- Under what circumstances will my prices change?
- When do I take ownership of this product?
- Can you give me a liability insurance certificate?
- What is your full product line?
