Where can companies find new sources of supply? What’s the risk?

June 30th, 2009

The economy still sucks. Unemployment continues to trend higher and small businesses are closing all over the world as a result of large companies like Chrysler

The economy still sucks. Unemployment continues to trend higher and small businesses are closing all over the world as a result of large companies like Chrysler, General Motors and others closing plants, delaying store openings and reducing or canceling orders.

Chrysler indicated last week that they would begin to ramp up production. This is potentially great news for all of the small and medium suppliers with which Chrysler has done business in the past. The same holds true for other small suppliers as retailers begin to open new stores requiring construction sourcing and larger product volumes. This also creates a huge catch twenty two.

According to Wikipedia, catch twenty two refers to more than the book title. In our case, it refers to the no win situation or double bind of potentially good news.

In our Chrysler example, the news is good that Chrysler will be opening up closed production lines requiring more supplies. The catch in this case is that the companies from which they have traditionally sourced may no longer be in business or may have cut staffing in such a way as to require money for ramping up their own labor or for purchasing raw materials. I’m sure you can apply this model to other industries or organizations that you may be familiar with. Many of these small suppliers may be facing liquidation or bankruptcies of their own. So, we have good news; but is it too late and how might companies and suppliers react?

This certainly creates an opportunity for collaboration beyond traditional trading partners. The question this begs; is where do you find them? One source may be your present procurement provider. The tough question is if they had suppliers in the past that might have been willing to bid on your business, why you were not exposed to them. A tougher question is why didn’t you ask?

The logical approach is to come up with a list of questions for your solutions provider. Here is a couple for you to consider?

1. Do you have a large non industry specific supplier database?
2. Does it include suppliers of all sizes?
3. Are suppliers interested in collaborating with other suppliers for smaller shares of a larger opportunity?
4. Do you have an RFI on file for all suppliers?
5. How quickly can you provide us with category specific lists of suppliers?
6. What other information can you provide relative to these suppliers?

We look forward to and appreciate your comments

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