You can still stay small and benefit from cozying up to the big dogs
When Gerry Phillips got a call from massive auto parts manufacturer TI Automotive, he pulled out all the stops. As co-owner and vice president of Michigan-based Prism Plastics, he had never played supplier to a company of TI’s scale.
"We had to work like crazy to get everything into production and meet our deadlines," he says. Primarily, it became a question of implementing systems. "For us, variation is the enemy, so it’s all about perfecting repeatable processes and using technology to get the best-possible results."
Many small companies like Prism dream of becoming suppliers to major national chains—but it isn’t easy to do. The major players may be wary of a smaller firm’s ability to deliver, or a minor shop may simply fly too low to make it onto the majors’ radars. Looking for an "in" with the top players? Here are some tips.
When the call comes, you’ll need to be ready with scalable technology, appropriate insurance and concrete plans for rapid expansion. "Check that you have the latest communications tools from mobile phones, secure email, and software to handle opening and editing contracts, spreadsheets, and files," says Ried Elenich of Airfoil Public Relations in Detroit. "Big projects may require you to add more staff both long- and/or short-term. Prepare potential job descriptions and identify freelancers or consultants to contact if needed."
Tell big buyers your size is a liability, and they will believe you. In fact, a small player has a lot to bring to the table that a larger supplier might not be able to offer. "They can sell the idea that because they are small, they are much more flexible than large companies and can handle design changes and demand changes much faster. In addition, smaller companies can be more responsive than larger companies due to the lack of internal bureaucracies," says Rick Pay, principal of The R Pay Company, an operations and supply chain consultancy.
In 2012, as part of the Obama Administration’s American Supplier initiative, IBM created a coalition of more than a dozen corporations that together spend $300 billion on outside suppliers. This Supplier Connection effort invites businesses to register online (http://www.supplier-connection.net) for a chance to play in the big leagues. Companies with less than $50 million in revenue or 500 employees fill in their basic information; large businesses then search the site looking for potential suppliers.
Sell the big picture.
"Small companies should open the doors to larger companies by focusing on the value they provide rather than just price," Pay says. "Often, larger competitors can achieve lower materials costs through volume that small companies cannot achieve. However, by focusing on the total cost of ownership (TCO), smaller companies can often offset that disadvantage. 'Total cost' includes things like inventory costs, logistics costs, cost of quality, and reliable supply. By addressing issues of total cost, smaller suppliers can often gain the upper hand on larger competitors."
Big nationals don’t know you from a hole in the wall. To earn their trust, small businesses can spend $80 for a TRAC number. Those registered with TRAC have shown that they can meet due diligence requirements as part of the greater supply chain. You’ll verify your identity, ensure you don’t have a history of bribery issues and generally commit to being as transparent as possible. All this helps build the confidence level of potential big-business buyers looking for trustworthy partners.
From there, it’s largely a matter of knocking on doors. LinkedIn can be a valuable tool for finding and reaching out to just the right buyers.
Trade shows are an ideal place to meet representatives of potential partners. For those willing to spend the money, a buyer’s rep can use existing relationships to open doors a small-business owner might never have been able to reach.
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