Small Business Leadership Academy: Understanding Corporate Procurement Practices (Part II)
One company’s purchasing is another company’s marketing.
If small and mid-sized businesses can keep that in mind, they will have discovered one of the secrets of success for a supplier, according to Joseph Carter, the Avnet Professor of Supply Chain Management at the W. P. Carey School of Business and instructor for the procurement classes in the 2011 Small Business Leadership Academy. Carter, a leading academic in the supply chain field, is also a Certified Purchasing Manager (C.P.M.) and Certified Professional in Supply Management (CPSM), designations granted by the National Association of Purchasing Management.
“The eye-opener for these business owners is self-awareness,” Carter said. “They are beginning to understand the role they play in their customers’ supply base.”
And that’s when procurement meets marketing.
“The owners of small businesses are so wrapped up in surviving that they don’t have the time – or the personnel – to specialize,” Carter said. “As a result many feel that their companies are under-appreciated by their customers.”
A company like SRP wants value from all of its customers, but a purchasing manager may be managing hundreds of suppliers. “A company, because it’s a large company, is not going to understand the supplier’s business and the supplier’s potential for adding value as well as the supplier does,” Carter said. Understanding the buying process and how the purchasing groups at large companies think enables suppliers to figure out what and when to communicate.
Suppliers must show how they add value to their customers’ enterprises. Sometimes that means understanding who the customer is. “The procurement officer is not your final customer,” Carter says. “Your customer is the user.” So small business owners cannot just try to compete on price. When dealing with procurement officers, they must elaborate on the total value that their company brings to the table, including “what’s in it for the procurement officer.” Elaborating on why working with their company will be worth the additional work of changing vendors, adding a new vendor, and the inherent risk of working with a new vendor, will enable that procurement officer to make that difficult choice with confidence.
The Small Business Leadership Academy (SBLA) is an intensive executive education program designed to strengthen the business acumen of small business leaders in Arizona. The program was jointly developed by the W. P. Carey School of Business and the Salt River Project (SRP), the program’s founding sponsor. Other seat sponsors this year include: Arizona Lottery, Blue Cross Blue Shield of Arizona, Hahnco and U. S. Bank. Each week we will bring you a few salient points from each class as well as comments from the professors themselves and the impact the information has had on the students.