Many entrepreneurs and startups always wonder at some point—especially during the early stages of their businesses—how can they redefine their suppliers as a strategic link within the vast spectrum of their supply chain.
According to a recent research, and in light of what supply chain expert David Kiger has previously noted about the intricacies of today’s connotation and scope of supply chain management, small businesses and startups that win large supply contracts are more likely to report average ROI more than 250% in the couple of years after their first successful sale.
In reality, the vast majority of successful entrepreneurs and startups, rather than mythical creatures are just people who has decided to put enough effort into producing results year after year by focusing on what is important: how to scale a business under today’s circumstances given the incipient nature of the venture.
Although the global supply chain has its own dynamism, it has been proven that its evolution depends on disruption rather than minnovation, which can also be accountable for the little attention it gets from aspiring business enthusiasts in the current business juncture; however, and be that as it may, entrepreneurial experience and know-how seem to work very effectively in the context of winning a long term supply contract and plugging-in as a reliable supplier.
Deciding to go down this path is not an easy task, though. Today’s understanding of corporate procurement processes is somewhat secretive, and these are certainly influenced by political agendas as well as the nature of their performance; however, there is certainly a way to win a spot within today’s supply chain for a successful scaling process: disclose more than recommended. Irrespective of whether entrepreneurs fancy this or not, the reality is that power lacks a defined sense of symmetry (which is also a reality elsewhere): large customers traditionally tend to possess a greater degree of influence. As a consequence, one plausible scenario is that they (large customers) keep their cards well hidden in regard to what they are looking for in the first place while expecting companies to reveal anything: prices, finances, production, quality, KPIs, etc.
Compliance is crucial for a plethora of markets. As industry newcomers, in order to gain the absolute trust of customers, some companies have decided to go full-transparency and disclose pretty much everything about their businesses so that purchasing executives would have no concerns about the veracity of a specific business and reputation. Such movement has proven to be particularly beneficial for those companies seeking to outpace their competitors in the race for winning a long term contract.
Another key aspect is culture. Managing culture while setting grounded and realistic expectations are particularly useful when it comes to surfing across the myriad of cultures that converge within today’s global supply chain. Global supply chains can cut across many different ways of thinking and culture: national, industries, technologies, markets and many more. Many alliances fail because of evident discrepancies between ways of thinking and cultures, in fact, there have been many cases where western companies cannot reach a contract agreement with easter companies. Think of Scandinavian based businesses and Japanese manufacturers, for instance. Under these circumstances, setting the right expectations becomes more than crucial or vital; business relationships can be saved just by learning how to settle and deal with realistic expectations in light of cultural imbalances: invest time and talent analyzing the implications of cultural and corporate differences, for doing so will bring a much better result.
Additionally, understand these relationships as long-term relationships: way beyond the first sale or purchase. One of the most important things about reaching a preferential spot into today’s supply chain is time. It does take a lot of time. An initial sales cycle can easily take up to two years before yielding the expected results and receiving the very first commercial order.
Of course, time is money, and in accordance with selling cycles, it all comes down to coming up with a creative way to handle finances while at it: banks sometimes help, private investors might be interested in buying some equity or lend money against future royalties should they find the project interesting enough. Other businesses take the risk of giving away attractive discounts in hopes of bringing customers willing to make pre-payments against purchases. In fact, advanced payments prove that banks and equity investors need to open their pockets from time to time.
Big customers should be regarded as an aid. Once they decide to partner with a startup, the startup should seize the customer’s expertise as a tool for growth, not only because it provides certain degree of assurance, but also because often times big customers are connected with much bigger customers, which is, by all means, the perfect scenario for startups to thrive while getting the most out of their supply chain.
* Featured Image courtesy of energepic.com at Pexels.com