Service, education may be the key
By Brian Milligan -- Purchasing, 8/12/1999 2:00:00 AM
Companies are consolidating their supplier bases. Contracts are harder to get, and the little guy is finding it harder and harder to compete on a national level. This makes today's supply environment very difficult for most minority suppliers.
But all is not lost. If there's a key to success for minority suppliers, it lies in their ability to find niches and provide excellent service.
It's simple advice, but it's what it's going to take for survival in a landscape where big companies are consolidating their supplier base. That's the one hidden card that Frank Quintana believes minority- and women-owned suppliers hold. It's the key, he says, that could help them gain a foothold in an increasingly challenging corporate landscape. "They can only compete if service is considered a factor," he says.
Quintana speaks from experience. His company, Quintana Industrial Supply Inc., an industrial supply company with warehouses in Massachusetts and Connecticut, watched as the corporations it regularly provided supplies for grew bigger and bigger--and harder to supply.
Quintana recalls how just a few years ago, his company had a contract with the Massachusetts-based Dynamics Research. But when the company suddenly sought a national bid for a supplier that could take care of all of its divisions, his company could not compete. Quintana says this probably cost Quintana Industrial Supply $100,000 per year in revenue. "That $100,000 is out the window, and there's nothing I can do in that situation," he says. "This happens more often than not these days."
Quintana says in theory, it should be easy for minority- and women-owned suppliers to make great gains as they compete for contracts. He says the typically smaller supplier has an edge, and can exploit this if it approaches things the right way. "Smaller suppliers can react more efficiently or quickly. They can do a lot of things much quicker than billion-dollar companies. In that way, we can outperform the Goliaths of industry.
"The key is to find areas where service levels have to be met," he continues.
To do this, he says smaller suppliers must go the extra mile. This means offering extra services to customers, such as an Internet purchasing system, distribution packages, or on-site supplier reps who manage customer inventory.
For example, Quintana notes that his company was able to impress the Connecticut-based United Technologies Corp. even after that corporation consolidated a portion of its supply base to 10 suppliers. He believes part of the reason for his success is Quintana Industrial Supply's proven promise of 24-hour delivery service.
But still, as companies continue to consolidate, Quintana says his company is finding it more and more of a challenge to drum up business. "I know when I approached other Fortune 50 companies that it's much more difficult than it was five years ago," he says. "Right now corporations are so fixed into cost-saving measures and into consolidating their supplier bases, they are all looking for more effective ways of doing business."
Scott Perkins, vice president of minority-owned supplier Trumark Steel & Processing in Michigan, agrees. "What should companies be doing better? I think they have to focus on what the customer really desires," Perkins says.
Perkins says so many companies--including those owned by women and minorities--fail to improve on basic management fundamentals as they run their business. They need to improve in small but important areas, like proper accounting, purchasing habits, or simple management. Failure to do so can hurt them as they try to break away from competitors.
In a time when supplier bases are being consolidated, Perkins says these companies can't afford the mistakes.
"You have to have the same strategies as a major company," he says. "I think in today's arena, service is the key driver. It makes the difference between an average supplier and an excellent supplier. Service is the one element that will break you away from the rest of the pack."
Dan McMackin, a spokesman for the Atlanta-based United Parcel Service, says minority- and women-owned suppliers often believe that lower prices will get them the job. But a lower price is not enough, he says.
McMackin gave the example of a Hispanic roofing company that worked for UPS. The company bid for the project, and offered something extra in the process. McMackin says the company offered to take a growing, local African American-owned roofing company under its wing and become its mentor. During this process, it would teach the other company how to acquire contracts with companies like UPS. In the end, it would provide UPS with yet another source for roofing work and supplies.
"At some point anyone can offer a lower price," he says. "You can cut your rates to the point where other companies do not think you are wise to. But if you want to differentiate yourself somehow, service is the way to do it."
It is the deeds--not the words--that grab the big company's eyes.
"Mr. Say is nothing. Mr. Do is the man," says Courtland Cox, director of the Minority Business Development Agency in Washington D.C. "People are saying a lot. It's what they are doing that's the [important] thing."
Carlton Highsmith, president of the minority-owned supplier Specialized Packaging Group, says the owners of the typically smaller women- and minority-owned suppliers must strive to educate themselves. It is this very education that will help them gain headway in the marketplace, he says.
"They must make sure they understand the landscape," he says. "They must understand their market--what it is, what it takes to be successful--to deploy the discipline and expertise to meet those requirements, and to keep the customer's requirements as the focal point of their business."
Highsmith uses his own company as an example. The Connecticut-based Specialized Packaging Group, a manufacturer of printed folding cartons for the household, personal care, oral care, food and beverage industries, sported annual sales of $71,310,000 by May. The firm showed a 186.2 % growth in revenues during 1998.
He says this sort of attitude will go a long way toward eliminating some people's perception that minority-and women-owned suppliers provide sub-par work and should be given the job for the good of society.
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