Getting Into the Middle Market Supplier Mindset (Part 2)

Earlier in the week, I wrote about the major themes from AJ Sweatt's supplier focused presentation at's Fusion roadshow. Today, I'd like to offer up some thoughts based on a supplier panel discussion from the event as well as my own perspectives on how smaller domestic suppliers are winning business in today's sourcing environment and in some cases, overcoming sourcing strategies designed to decrease their margins.

First, many smart suppliers are developing an "attraction" vs. a "push" type of marketing message and focus. This often comes down to differentiation on the shop floor level and value-added capabilities. For example, can a supplier support just in time (JIT) sequencing requirements or vendor managed inventory (VMI)? Does a supplier have ISO or industry-based certifications (e.g., TS)? Can they turn around orders more quickly than their competition and / or offer manufacturing capabilities and processes that others can't provide? If the answer to any of these is "yes", then it is key for suppliers to take a proactive approach in marketing these capabilities to create an environment where sourcing organizations are naturally attracted to them.

For example, if a machining supplier knows it can deliver on both long and short production runs at high quality levels with rapid turnaround time, they might decide to invest in marketing programs that target companies that have been burned by global sourcing. This might include PR, search engine optimization, and building awareness with marketplaces and sourcing intermediaries (e.g., consultants).

But better and appropriate marketing is not the only ticket to thriving as a domestic supplier today. Deploying counter sourcing strategies is as well. This requires really knowing what makes a sourcing organization tick -- and how they will go about thinking about the award decision. Counter sourcing strategies might take the form of offering discounts prior to a sourcing event with a "best and final price" which is only good to a certain date. It might include bundled, lower pricing in return for larger production volumes and more parts -- in other words, a greater share of a company's spend. It also might include stripping out any value-added offerings from their online or off-line bids if they're not specified in the RFQ -- which others suppliers are likely not to offer, for one reason or another -- and then up-charging for these after an award decision.

Differentiation through technology is another way domestic suppliers are winning business from their overseas counterparts. At the supplier panel at Fusion, one supplier talked about how they won what will be a seven-figure annual package for a highly complicated metals category where global sourcing was not an option for the buying organization because of the complexity and tight tolerances required. The buying organization -- who previously did not know this supplier -- identified them through a strategic sourcing process using an online marketplace that included both domestic and global suppliers.

Without question, smart domestic suppliers are doing just fine in today's environment, even given the rise of global sourcing. But better sales and marketing and differentiation are key to not just winning new business, but surviving. I think that AJ and I would both concur that it's an all or nothing proposition. And personally, I don't want to be the sourcing consultant or the practitioner left holding the bag when an older supplier who refuse to change with the times ends up going belly up.

Jason Busch

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