My Blog

Untapped Value

I was in a meeting the other day with several peers from a large corporation and one of the topics discussed was tapping in to smaller suppliers.  Past research data has shown that large companies stick with large suppliers and small companies utilize smaller suppliers.
As we talked, we identified a number of reasons why this happens, the most prevalent of which is the obvious - size compatibility.  It seems that like-sized company counterparts feel more comfortable (and productive) in day-to-day business relationships because of sophistication synchronization, similar financial structure and finally, policy/procedure guideline issues.
In a large company environment, as it turns out, a surprisingly high number of cost savings are never realized because of existing agreements with pre-determined pricing and discount structures.  This is not a bad situation if you look at a "global" view of an entire organization, however the inevitable trickle-down is that a department with a limited budget often has no choice in the matter and after several notable purchases, someone has to walk the red carpet and petition for more money.  Never a pleasant task.
How do you get around this?  Well, that's not an easy task but it is definitely not an insurmountable goal.  One way that we are all familiar with is the use of the almighty "P-Card".  Lately though, I've heard that spending limits are being reduced so the incentive for spending outside traditional approved supplier base is vanishing.
Another, more innovative way - do the research needed to identify small cottage-industry companies offering goods or services that can provide the favorable cost/benefit to your organization.  Lets face it, today is still a Buyer's Market and there are a significant number of resourceful small companies just waiting for the opportunity to unseat an incumbent supplier.  These companies tend to have less of an overhead and can be more competitive on a one-off purchase or even a long-term deal.  There is a short-term down side - that is training a new company.  Sometimes painful but the upside is you have the opportunity to mold a company into exactly what you need them to be.
Like I say to my clients - "An RFP doesn't cost anything, but value proposals can save you money!
Help support small businesses.  After all, our great country was founded on small business owners!

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