Procurements’ Best Kept Secret - Supplier Diversity

Small companies are the lifeblood of American economy, a tradition and a safe ground it can always lean on.

Diversity and Perseverance is What Makes Small Procurement Companies Great

Our diversity and perseverance is what makes us so valuable and indispensable. The expertise that we gain by focusing on specific areas and relationships that we develop by personally engaging with our buyers is the confirmation that the best quality service or a product will be provided when need be.

Just because small and diverse procurement companies don’t have the resources of the large ones they tend to be, in my opinion mistakenly, considered at a disadvantage. But people often forget that we make up for what we don’t have in size with innovative and more personal, sometimes even tailor made, approach which can, on the other hand, help the supplied companies improve the areas of their business in a ways that they didn’t even think are possible.

Also let me remind you that working with diverse suppliers means both supporting the small businesses and keeping oneself on the right track.

Benefits of Working With Diverse Suppliers

But how is all of this significant for the procurement department? It turns out quite a lot.

A study by the Hackett Group found that the procurement departments working with diverse suppliers had lower operating costs, spent up to 20% less on their overhead costs and generated a 133% greater return on their buying operations. What is more, this same study showed that 23% of diverse suppliers often or greatly exceed buyers’ expectations and the majority of remaining diverse suppliers are meeting expectations.

This money oriented is just one and the most important advantages of working with diverse suppliers, but in case I should do any more convincing, there are numerous others.

In my opinion, as a small procurement company owner, these five are equally valuable:

1. Agility – Smaller procurement companies make quicker moves. Larger ones must exchange information between multiple departments and often multiple signatures and approvals are required to move product fulfillment downstream. This time and resource draining procedure is exacerbated whenever a new product or configuration is requested. In smaller procurement companies one person can pick up the phone, call the supplier and get the needed information in a nick of time.

2. Flexibility – Sourcing is more open-ended. Small procurement companies are not forced by procedures into engaging with only certain suppliers. What is more, we have the ability to innovate and we are willing to break the mould in order to find quick and practical solutions for new procurement requirements. For example, a company might need a widget in a different size – a small business, such as ours, can put together the elements that go into fulfilling that requirement right away and deliver the solution with minimum time invested.

3. Pricing – Diverse procurement companies are more in touch with small businesses which offer the same brands and products as the big ones, but might not be on the radar or in the supplier base of the large companies. By engaging with multiple suppliers we can locate the best combination of price, availability, and geographic proximity per the requested item

4. Owner operated – Day to day operations of diverse suppliers are usually run by the owners of the company, such as myself, who have a keen vested interest to ensure that all orders are executed to perfection. Not only because the reputation of our business (and consequently our own) is important to us, but simply because our livelihood depends on it. This is undoubtedly unlike employees at large companies who often do not have the same sense of care and motivation in handling orders, because their main goal is more oriented towards their monthly pay or certain scope of work and less towards the company’s image. Furthermore, owner operated companies can almost read their clients’ minds. We have had the ability to develop a knowledge base about our clients (what, when and how they need their product/service) and product expertise that large companies due to multitude of operations often can’t afford. This advantage creates greater efficiencies and therefore better service in general.

5. Value driven – As an owner of a small procurement company, I can tell you that our entire staff goes out of their way to negotiate with suppliers on every transaction and not only when asked. We want to make sure our customer is getting maximum value for their money and we use every opportunity we can to improve our service and deliverables. This is the level of care that you rarely get when working with a large company which may not have as much freedom in their daily operations, but has to follow established rules and regulations or simply doesn’t see their own benefits in these negotiations.

These are only five best aspects of working with small suppliers, where I didn’t even mention that extremely selfish reason of supporting small businesses which helps the entrepreneurial spirit and actually brings even more options for the companies being supplied.

In case you are not selfish, but oriented towards corporate branding through responsibility and sustainability and want everyone to know about it, I would like to mention the topic of Supplier Diversity as a movement which is applied by most top-performing companies in the world. This way by helping them be included in the supply chain, women and minorities are encouraged as entrepreneurs and can bring their own innovative ideas into the supply chain and business as a whole. And I would just like to underline that innovation is exactly that one key point that sets one company above its competition.

Author: Jerry Greiff, President of Central Trading Agency, Inc