Getting on a major corporations list of pre-approved suppliers. Ideal? No. Worth it? Probably.

Very large companies usually have pre-approved supplier lists and employees are often required to select from these suppliers first and only to look for other companies if there is a reason not to - literally like this: ‘Is this a pre-approved supplier? Yes/No. If No give reasons’. 

 

Sounds like a great opportunity for a supplier? Well, yes and no. The reason companies have approved supplier lists is to streamline procurement administration to save time, to have a clear system for quality control purposes and avoid anticompetitive practices by staff. It is definitely not to tailor thousands of special contracts with suppliers, it is the opposite, to standardise them. You are typically sent a standard contract to sign with little or no ability to make variations. The contract will umbrella over any subsequent transactions and is designed so everything in the future can be managed with quotes or proposals and invoices rather than revisiting contractual terms. You might even need to sign into their system to lodge invoices in their format. Requirements will vary and sometimes you will have no choice if you want to do any business at all with them, but at a minimum you will submit your company information, certifications, proof of insurances and so on and need to resubmit as they are renewed or you drop off the list. 

Want to see how complex it can get? Take a look at the mandatory Siemens pre-qualification.

With these large companies you will need some level of approval to supply any sort of goods and services in any case but if you are asked go on a pre- approved supplier list, the contract may differ so have a lawyer take another look and explain the contract and arrangement to you. Look at what is involved and think about whether it is an arrangement you can work with.

Keep in mind, nine times out of ten, they are not trying to be unfair, they are trying to be organised and efficient so they can get down to business faster but , yes, this will usually involve transferring risk, responsibility and administrative work to you. Usually the easiest thing for the large company is not the best thing for the smaller company, but remember what they are doing is making it easier for themselves to buy from you. If you encounter a small player with only a couple of suppliers exercising inflexibility over contracts their behaviour is irrational - you know what to do. If it is a major player who manages many, even hundreds of suppliers then you need to figure out ‘what is it worth to me to get in the game?' 

 

 

 

Nine out of ten times? What about the exception? I have seen companies (sometimes even self-managing subsidiaries of large, respected companies) use approved supplier lists as a cover for inefficient and anti-competitive behaviour, that is for kickbacks and other corrupt purposes. It can originate from individuals, (administrative staff to executives), or it can be systemic. Implementing data analytics and machine learning to identify anomalies across everything from transaction data to geocoding is an option but on a personal level one way to avoid people like this ruining your reputation and prospects for doing business with major players is to keep everything visible and above board. This can be as easy as confirming discussions and decisions in follow up emails and ccing emails to other people in their company. If it is a systemic issue, well you've heard the saying 'lie down with dogs, get up with fleas'...

 

 

What happens when there is no consistent procurement process or checking of suppliers? Well here is an example where corruption went viral amongst public servants in Australia a few years ago. Private companies were also affected, but the investigations focussed on the public sector because of the waste of public money. 

 

 

 

Smaller companies also need procedures for procurement to minimise risk and be more efficient. They need not be complex, just consistent and relevant to the business. In fact the simpler they are the more likely they will be effective because people will use them. A smart way to manage it is to optimise time and money checking your own suppliers (and buyers) based on the value of transactions and how critical they are to your business process. Apply the same thinking to whether it is worth doing it yourself or paying for a company check. For example: If you live in China and the company you are checking is in China, you can easily find all you need to know quickly, in fact they know the information you need and will probably send it straight to you plus you will know when something looks suspicious. However, if you want to check a company in another country you might not know what you need or how to find it so it can take a lot of time and effort that could be spent more profitably carrying out your own role.