Management & Strategy

Keeping your place in the supply chain

Does your business supply a much larger company? Convincing blue chips to bank on an SME is no mean feat. But landing the contract is just the start: keeping it is a 24/7 job. Follow our tips to help you stay ahead of the game.

With the economy in the doldrums, any businesses at the top of supply chains are being advised to shop around, research the market, ask for references and, in general, make sure they have constructed a hierarchy of suppliers who are the most efficient, productive and reliable businesses around.

This means that at every link in the chain, each business has researched the one supplying it. The result, hypothetically, is a long line of vetted businesses ¬– from raw materials to the distribution of finished products.

So what are they looking for in a business? Official advice says they want quality and reliability. They assess whether companies can be quick as well as flexible, are value for money, have clear communication channels and sound financial security. They’ll also be looking at your environmental status and your commitment to CSR.

Roughly translated, if you want to be a supplier – particularly to a big business with endless resources – then you must offer the highest standards of quality and customer service, be seen to be a solid business – and accept wafer-thin margins.

You might feel that you’re left with a set of targets that are hard to grasp, let alone achieve. But read on for some helpful tools, plus insights from one B2B customer.

Make sure you e-collaborate

Companies at the top of the supply chain expect the businesses they partner with to be technologically proficient. e-collaboration is the act of sharing information virtually and in real time. Some software now allows businesses to track each other’s movements – giving them clarity about when jobs are likely to conclude. Prestigious clients will expect you to be able to sync with their software, or simply implement theirs into your organisation, so they can track orders to the minute.

These firms are also likely to have analytical data software, which can compile accurate data about the reliability of your work – from the first job to the most recent. Enterprise Resource Planning (ERP) software is also popular: it syncs planning and orders and so that jobs can be booked, tracked and invoiced for automatically.

Meet your supply protocol

Businesses take supply chain management very seriously – from selecting the right businesses to ordering them efficiently and elegantly. Big companies, especially, have a structured protocol for deciding who wins tenders. It’s based on the age, structure, references and track record of their new supplier.

They will bargain hard to get the best price. They might even renegotiate on cost after they’ve made their selection.

Expect regular performance reviews. You will have agreed to certain standards before winning the business so you’ll be assessed every 12 months, at least. Terms and conditions will be exacting, too. They’ll include break clauses and legal get-outs, should your standards slip for whatever reason.

Use the ‘just in time’ approach

Margins will be tight when you work with a prestigious client, so you might be tempted to consider ‘just in time’ production and supply techniques. This helps minimise costs by creating and supplying goods to order, rather than distributing from existing stock.

Just in time reduces the risk of over-ordering as well as your warehousing needs, freeing up more cash to invest in other areas of your business. It also reduces losses to your business should it be affected by flood or fire.

A word of warning, however: security contractor G4S used a just in time approach in its contract to supply security staff for the Olympic Games, and came up short – despite a multi-million pound supply contract. G4S admitted that this approach to recruitment – which meant paying people for less time – was responsible for the shortfall. Just in time doesn’t always work, so think carefully before you implement it.

Become a preferred supplier

Preferred supplier status is highly sought-after by businesses everywhere. It means that a buyer will look favourably on your business in a tender battle with another firm. Winning this status isn’t easy, but it is straightforward: simply build a strong reputation for quality and reliability – one that makes customers come back to you time after time.

Being part of a supply chain isn’t always a comfortable place to be, but if your company commits to the principles of good business, your journey will be a lot smoother. And if all goes well, your new client will want to solidify and deepen the relationship by involving you in their plans and inviting you to share in their vision for the future.

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John Carroll - Helping businesses achieve International success. Head of Product Management & International Business, Santander UK