How To Nurture Minority-Owned Suppliers and SMEs
By Hugo Britt | October 19, 2021
The U.S. Small Business Administration estimates there are over eight million minority-owned companies in the United States. What are some of the benefits of working with these suppliers, and how can procurement teams best support them?
Benefits of working with SMEs and minority-owned suppliers
Here are just a few benefits of working with small and medium-sized enterprises (SMEs) and minority-owned suppliers.
Relying on bigger and more established suppliers might make your organization feel more secure, but it’s a sure-fire way to stifle creativity within your supply chain. SMEs and minority-owned suppliers typically prioritize innovation as a way of differentiating themselves from the competition, driving cost reductions, and operating sustainably.
In addition, less bureaucracy means being able to operate with more agility – updating their service offerings or quickly pivoting as required.
Developing an inclusive procurement strategy will extend the supplier pool and promote competition within your supply base. As a result, SMEs and minority-owned suppliers will be committed to providing you with a high-quality service at the best possible price in order to win contracts.
Working with SMEs and minority-owned suppliers is good for your brand’s reputation and helps you win social license. By implementing a robust and effective supplier diversity program, you demonstrate a commitment to diversity, equity, and inclusion, which will help you to attract and retain top talent and foster a loyal customer base.
In addition, supplier diversity programs often see organizations partnering with an increased number of local suppliers, which supports local communities and drives sustainability through your supply chain.
A reliance on a single supplier for critical goods is a risky prospect, no matter the size or experience of the vendor. The trust you establish by forging meaningful partnerships with a range of SMEs and minority-owned suppliers will result in a more secure supply chain because these vendors will be more incentivized to deliver a consistent and reliable service. Reducing your dependence on single-source suppliers is also vital in a world where unprecedented, and devastating, supply chain disruptions are increasingly common.
4 ways to look after your SMEs and minority-owned suppliers
Now that you’re committed to diversifying your supplier base, it’s important to not lose sight of those relationships. Here are 4 ways to nurture your SMEs and minority-owned suppliers.
1. Focus on building long-lasting relationships
You won’t reap any of the benefits of working with SMEs and minority-owned suppliers without investing sufficient time to build genuine and meaningful relationships. Regular communication, close collaboration, and in-person meetings are the factors that will ultimately contribute to increased innovation, cost savings, and security throughout your supply chain.
Implementing a preferred supplier program can help you determine which supplier relationships will benefit most from your time and energy. Establishing a close and collaborative working relationship with a core group of suppliers is mutually beneficial, with each side more motivated to support the other and deliver creative results.
2. Be adaptable and flexible
SMEs and minority-owned suppliers may not have sufficient resources at their disposal to manage complex contract negotiations, lengthy onboarding processes, and endless corporate red tape.
While it’s important to conduct thorough risk assessments and ensure all suppliers adhere to compliance requirements, other areas invite a little more flexibility. Simplifying contracts, shortening payment terms, sharing the responsibility for risk, and limiting KPIs are just some of the concessions SMEs and minority-owned suppliers will value enormously.
For suppliers that fail to meet your organization’s procurement needs and compliance requirements, consider guiding them through the necessary certifications, training programs, or other processes.
By accommodating the needs of your SMEs and minority-owned suppliers, you give them room to focus on what they do best – driving innovation for your business.
3. Manage risk fairly
Working with SMEs and minority-owned suppliers is not without its risks, but that doesn’t mean dismissing them in favor of working with larger corporations. Instead, take the time to carefully evaluate prospective suppliers and determine what risks they pose. You’ll find reassurance in talking vendors about previous successful partnerships and insisting on complete financial transparency.
Once you’ve identified where the biggest risks lie, you can review the data you’ve collected with your suppliers and work closely with them to strengthen your working relationship, help them to improve their business operations, avoid significant disruption in the future, and ultimately protect your business.
4. Pay on time
Last, but by absolutely no means least – pay your suppliers on time.
It has been proven that late payments disproportionately impact small businesses, because SMEs and minority-owned suppliers simply don’t have the same resources to cope with missed or late payments. Unlike larger corporations, they often depend on good cash flow and shorter payment terms to stay afloat. If you and other buyers repeatedly fail to pay a smaller vendor on time, you risk stalling their operations at best and bankrupting them at worst – impacting your supply chain as well as their business.
Furthermore, you don’t want to earn a reputation for treating SMEs and minority-owned suppliers badly, so make sure you have the systems in place that guarantee prompt payment.
Need help diversifying your supplier portfolio? Una partners with hundreds of the nation’s best suppliers. Contact us to learn more.