When You?re a Diverse Supplier

Dear Small Diverse Supplier:
We want you to survive.
Your Big Corporate Customer.

From Shelley Stewart Jr., chairman of the Institute for Supply Management, the country?s largest professional association of procurement officers, to Harriet Michel, president of the National Minority Supplier Development Council Inc., the advice is the same from experts on small-business suppliers: During the current economic recession, it is critical for small suppliers to let their biggest customers know if they are in trouble because these same customers may be able to help.

While many large firms are trying to cut back on the number of vendors, a simple, pragmatic motivation for Fortune 500 companies to keep small minority vendors alive is the fear of disruption in their supply chain if the vendors die, these experts say. ?This is the time you really have to manage your relationship honestly. If they are delaying payment, tell them. They are not there to put you out of business,? says Michel.

Stewart, who is the supply management institute?s first Black chairman as well as the chief procurement officer at Tyco International Ltd., concurs, stressing that if your company is having difficulty staying afloat because of the credit crunch, a big customer may be more than willing and able to help. For example, such a customer can leverage its own relationship with the bank where you have a line of credit, or it can introduce you to lending officers at other banks where it does business. During a recession, large companies tend to put all of their vendors under a microscope, Stewart further notes, and any instance of poor service, such as late deliveries, could cause you to lose future business with those companies.

Indeed, now is the time for small and minority vendors to seriously engage in strategic planning in preparation for the postrecession, the procurement association chair says. ?You need to know as much about your customers? growth opportunities as they do. A lot of time suppliers don?t and they miss growth and market opportunities,? Stewart says.

Both Stewart and Michel emphasize the importance of getting your costs down. The NMSOC head points out that small businesses often have cost advantages over larger suppliers because their overhead is lower. Innovation is equally important, Michel says, as it will increase the value your firm can provide to a large customer.

The good news for Black-owned and other minority-owned businesses may be that along with the reduced number of contracts up for bid during the recession there is decreased competition, often because some suppliers succumb to the harsh economic environment, says Eric Dobyne, Chicago regional director for
the U.S. Department of Commerce Minority Business Development Agency. Dobyne says the biggest mistake a small company can make is to be so blinded by the recession that it does not prepare for the growth opportunities that inevitably will arise in the years ahead. One good preparation tactic is to partner with other small firms so that your small firm looks like a larger vendor to your large customers, he suggests.

Other tactics include diversifying your customer base and using the slow days to make personal contact with existing and potential customers. ?The president?s stimulus plan offers a wealth of possibilities, but with the government, as with businesses, making personal contacts is key,? Dobyne says.??? ?