Getting Into the Middle Market Supplier Mindset (Part 1)

Last week as MFG.com's Fusion tour swung through Chicago, I had the chance to catch a presentation and panel discussion led by MFG's AJ Sweatt that offered up advice on helping smaller direct materials suppliers to better market themselves to procurement organizations. AJ -- who also happens to play a mean guitar -- is an absolutely gifted public speaker and one that you should seek out. If you take one part preacher, a second part politician and a third part manufacturing pundit and you gently shake the cocktail sifter, that's AJ. The man is absolutely dangerous with a microphone, and is probably the best speaker I've heard in the past year.

AJ began his presentation by suggesting than typical suppliers are not good marketers, but they must get better if they want to survive in today's times. These words certainly rung true to the sixty or so suppliers who attended his break-out session, many of whom I suspect have been "freemarketed" over the years and forced to adopt to changing expectations from sourcing organizations. As an example to show how things are changing, AJ cited the case of GE, who previously vetted direct materials over a 12 week to 24 week time-frame, but now tries to shorten negotiation cycles to approximately two weeks when it can. Obviously, the chance for suppliers to influence a decision is greatly shortened in cases like this.

For AJ, the best way to keep up with the changing times is to be prepared. In this regard, he cited Frederick the Great's statement "it is pardonable to be defeated, but never surprised" numerous times. He also used the Route 66 analogy to suggest that suppliers who don’t keep up with the times will slowly fade and close their doors. Back when Route 66 was the main artery from Chicago to LA, thousands upon thousands of businesses emerged to capitalize on the traffic. And traffic there was. According to AJ, it was possible to accurately measure East to West migration by counting Route 66 traffic.

But as the Interstate highways system came of age in the 50s -- and as air travel began to take flight -- Route 66 was no longer the only ticket to the West in town. In fact, traffic began to slow. But many businesses who did not see the writing on the wall remained and were forced to ultimately close their doors when they were bypassed. For AJ, the Internet is the modern version of the Route 66 replacement. But most small and middle market suppliers in North America are still operating in the Route 66 mindset. The challenge here is that the "Internet is bypassing familiar channels of communications" and "creating new opportunities to move into different places" but few suppliers are prepared to fully take advantage of it.

For AJ, the good news is that the death of American manufacturing is greatly exaggerated. In fact, he believes that huge opportunity exists today for those suppliers who are willing to change with the times. AJ also suggested that because of the rising China price -- not to mention concerns over China quality -- that the time is ripe for US suppliers to take back marketshare. MFG.com's own survey numbers support this thinking. Based on sample size of 983 respondents, 50% of sourcing organizations using MFG.com "prefer local suppliers" and 15% "only source locally". 17% prefer low cost country suppliers, while 4% only source from low cost regions (14% offered no response to the survey). If you're adding up the numbers, there are roughly three times the number of buying organizations who expressed a preference for sourcing domestically. That's huge. But how can suppliers best market to them, not to mention attempting to defeat hammer-driven sourcing strategies that many procurement organizations deploy? Stay tuned for Part 2 of this post later in the week to find out.

Jason Busch

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