What's The Bottom-Line Benefit of Seeking Out Small Suppliers?

While many supplier diversity initiatives are criticized because they seem more like the byproduct of social responsibility rather than a profitable business plan, I always like to address the benefits of viewing your prospective supply base in terms of big suppliers and small suppliers.

In the PurchTips article, "Doing Better Business With Small Suppliers," I point out a few advantages of doing business with small suppliers such as "fewer channels to go through to get responses and sometimes even lower cost due to less overhead." Yesterday, Purchasing Magazine published an article on their Web site entitled "Spending with small business doesn't have to suffer in recession" that detailed aerospace giant Rockwell Collins' admirable approach to growing their spend with small suppliers.

The article cites some benefits that Rockwell Collins has realized as a result of their small supplier efforts. A Rockwell Collins sourcing executive is quoted as saying "Small businesses react well to our requests since we are typically a bigger percentage of their business than a large supplier."

In addition, being a small supplier may make change and improvements easier to drive. The article cites a Rockwell Collins' small supplier development initiative that resulted in a small supplier improving on-time deliveries to 99.8% from 96%. And we all know that better on-time delivery equals fewer costly production stoppages, less inventory, and, ultimately, higher profits.
There is definitely a bottom-line advantage to using small suppliers where appropriate. I hope that Rockwell Collins continues to take the lead with their small supplier development efforts and shows the profession how to achieve better documented results with such a program.

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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