by Reed Richardson.
Few small businesses are truly standalone companies. Most require some kind of raw materials or natural resources for their products or services and many others rely upon some form of delivery or distribution assistance to reach their customers. These B2B supply chain partners, though not strictly part of a small company, nonetheless play a crucial role in any entrepreneurial endeavor’s chances for long-term success. A hiccup in upstream parts inventory can quickly shut down a small manufacturer, while a breakdown in customer shipping can likewise paralyze an online retail store. So the process of finding and choosing these crucial links in a small company’s supply chain cannot be overlooked or blithely executed.
Starting out, don’t assume, ask instead
“‘Where do I start my search for suppliers?’ is a typical question I get asked a lot, but it’s somewhat difficult to answer,” says Glenn Eisen, a SCORE advisor from Hastings-on-Hudson, N.Y., with more than four decades of supply chain management experience. “More often than not, I just begin by sitting down with the small business owner, discussing their product, and then trying to find a directed solution specific to that product’s needs.”
For example, if an entrepreneur will be selling clothing, Eisen explains that it’s probably best for cost reasons to start a search for a supplier overseas, whereas a product primarily made of metal might be better sourced by looking in Milwaukee or Minneapolis because of the large metalworks markets there. “It’s important to understand that there’s no single supply chain answer that fits every company,” he points out. “And once you do start finding potential suppliers, don’t assume you’ll know what you’ll need from them and don’t be afraid to ask lots of questions.”
Cracking the code to successful supplier searches
Most vendors and suppliers are categorized by specific product and industry type. So it’s a good idea for small business owners to start their search by becoming familiar with the North American Industry Classification System (NAICS) and older Standard Industrial Classification (SIC) codes. These codes, which range from two to six digits, depending on their specificity, are a key piece of sorting information to have on hand when searching through industry supplier catalogs or online directories. In fact, it’s a good idea for entrepreneurs to not only know the SIC and NAICS codes of all their suppliers and vendors but for their own products and services as well. (For more on how these codes work and to conduct a quick supplier search, check out this SIC and NAICS online tutorial and NAICS lookup tool, respectively.)
For a more old-school approach, try looking in trade publications and magazines related to your suppliers’ industry. Those articles and advertisements often provide helpful background information and insider knowledge not typically available on the Internet. (For a list of free trade publications, sorted by industry, try searching the online subscription directory TradePub.) Another, somewhat less obvious, choice for supplier information involves your small business’s peers and—yes—competitors. Some of these companies may be hesitant to provide their vendor details, but many others may be surprisingly open and willing to share data about how to get the best deals. Finally, it’s worth checking out the vendor lists commonly included on local, regional, and national government websites. Whether city, state, or federal agency-based, these resources can often provide a struggling entrepreneur with a handy starting point in his or her search for reliable, vetted suppliers.
Don’t fall victim to the “If you want something done right…” trap
While each small business’s supply chain solution needs to be uniquely tailored to its specific industry, location, and customers, it’s also important to realize that it’s not necessary to try and build a supply chain from the ground up. “That’s the first big mistake I see,” explains Eisen. “Small businesses get buried in supply chain procurement, administration, and structure when they don’t have the time or resources for that. Don’t go out and try and reinvent the wheel. It’s better if you find some reliable suppliers that can do the work for you, so you can concentrate on selling and marketing your business.”
To illustrate his point, Eisen cites a Los Angeles-based small business appliance maker he counseled recently. The entrepreneur, who had developed a compact, combined washer-dryer that was perfect for urban markets with lots of apartments, was devoting too much of his time personally boxing up and shipping his product directly to customers, mainly in New York City. “He was spending hours and hours and anywhere from $50 to $60 to ship to each one,” Eisen recalls. “I convinced him to hand this task off to a third-party logistics company that would batch the orders up and ship 50 at a time to New York, where a haulage company would then pick them up from a warehouse and individually deliver them. By doing this, his shipping costs dropped to $20 per unit and, because he saved so much time, he was free to market and sell more.”
Ability to leap multiple supply chain links with a single source
For small business owners looking to streamline and consolidate their supply chain, third-party logistical (3PL) providers, like the one Eisen recommended, can be an elegant and cost efficient solution. By offering both upstream and downstream services, like overseas shipping, air freight, customs clearance, warehousing, freight forwarding, and even home delivery, 3PL companies can provide one-stop shopping for a wealth of logistical solutions. “Remember, a company’s supply chain doesn’t end when it gets, say, a shirt from the manufacturer in China,” notes Eisen. “It ends when the customer finally gets what they ordered.”
Price matters, but so too do quality and agility
The quest for the cheapest goods available can sometimes blind a small business owner’s vision of what’s best in the long-term for his or her company. For that reason, searching for vendors overseas should be done with an abundance of caution and should be thoroughly tested using small, trial-size orders initially. This is particularly important since few small business owners will ever conduct a face-to-face visit with any of their potential overseas suppliers.
Moreover, keep in mind that a supply chain originating in a factory located halfway around the world can be susceptible to problems—like natural disasters, worker’s strikes, and political unrest—not commonly experienced here. Intangible factors like these, which can result in missed shipments and canceled orders, don’t show up in an order quote and may ultimately prove to exact a higher price than choosing a more expensive, but more reliable and flexible domestic supplier.
Those latter characteristics, Eisen points out, create the strongest supply chains. “Ordering from a supplier is just that, an order,” he says, adding that ordering connotes a one-time event with no long-term mutual benefits. “But buying from a supplier is about building a relationship over time so that two companies can help each other grow and succeed. That’s what to look for when you’re building a supply chain.”