Stop turning off small- and medium-sized suppliers and turn them into partners instead.
Small and medium-sized businesses (SMBs) make fantastic and valuable partners in the supply chain. After all, they are typically more flexible and responsive than their larger counterparts, and they allow you to take advantage of the benefits of local sourcing.
Unfortunately, larger buying organizations make it difficult for these smaller companies to participate in their RFI and RFP processes. As a result, SMBs are less likely to participate in these sourcing events. In fact, THOMASNET.com found that Fortune 500 organizations receive only 12% response rate to their requests.
Why don't smaller businesses want your business?
There are four major perceptions that SMBs have of larger buying organizations which may prevent them from participating in supply chain events. They are:
- Bureaucratic process: The RFx process for large organizations can be repetitive, unfocused and, even worse, inhuman. SMBs want to deal with decision makers and experts who can help them deliver the best and most accurate bids possible.
- Long odds: The odds of winning the bid do not justify the amount of work that would be required to submit it. If SMBs think they are just one of thousands of shops competing for a job, they won’t bother.
- Putting too many eggs in one basket: Large businesses want to dictate timing, contract terms and even production. This causes a lot of pain to SMBs who, naturally, are reluctant to change everything for one client. Also, the idea of tying their financial fortunes to one customer can be risky.
- Long payment terms: Buyers naturally want to extend payment terms to improve cash flow, but this just shifts the burden to the SMB which, in many cases, doesn’t have the line of credit necessary to float cash for long periods of time.
How can your business be more friendly to SMBs?
Fortunately, there are ways for procurement teams to overcome these perceptions and build strong relationships with SMBs. To find out what they are, download our Top Tips For Working With SMBs.