How your business can tap into global supply chains
4 minutes read
Think your company is too small to join a multinational’s supply chain? Think again. It seems they may need your company as much as you need them.
"The reality is that larger corporations are looking to partner with small, specialized companies," says Andrew Richardson, President of fast-growing Targray Technology International.
Niche products and close relationships
"Smaller companies have the niche products, fast turnaround times and close customer relationships that multinationals need to stay innovative and competitive," Richardson says.
Montreal-based Targray is a case in point. Some of the world’s leading solar cell manufacturers rely on Targray to provide the state-of-the-art products that enable them to make cells for solar panels at the lowest possible cost per watt.
The same goes for major electronics makers such as Sony and JVC, which use Targray’s materials to produce CDs, DVDs and Blu-ray discs. It’s a safe bet that at least half of the CDs and DVDs in your home contain material provided by Targray.
Multinationals need reliable suppliers that measure up in terms of quality, price and delivery. One misstep from a supplier can have devastating ripple effects throughout the entire supply chain.
The result is that many multinationals are shifting from short-term transaction-based relationships to long-term collaborative partnerships with smaller suppliers.
Jérôme Nycz, Executive Vice President, BDC Capital, says large companies want to know their supplier is financially stable. They are also looking for companies that have quality certifications and can scale up production to meet demand.
"A benefit of this rigorous vetting process is that all partners in the supply chain become more competitive," Nycz says.
Planning is paramount
Companies need a well thought-out plan that assesses their capabilities and how they could contribute to building a resilient and flexible supply chain. Treat supply chain management as a core element of your business strategy, adopting best practices and developing the requisite skills in your organization.
As part of your planning, expect to share more risk and more responsibility with your supply chain partners, such as accepting longer payment terms or sharing research and development costs.
"What large companies are saying is, ‘we have a problem and we need it solved’," says Jayson Myers, President and CEO of Canadian Manufacturers & Exporters. "It’s a reflection that no one large company has all the R&D, the intellectual property or even the idea. It’s counting on smaller suppliers to come up with these solutions."
Update your technology
Providing those solutions will also require up-to-date technology, says Myers, which can help companies respond quickly when a customer makes changes to a design, delivery or price.
As well, global buyers need integrated backend systems and automated processes that can be monitored online by all participants in the supply chain.
"Global buyers want to be able to see up and down the supply chain to make sure the inventory is available and the project is on schedule," Nycz says.
Partner with a domestic exporter
Too often small companies lack the resources and expertise required to do business in a foreign market. Myers recommends partnering with a Canadian company already embedded in a global supply chain.
"This also serves the needs of the multinational, which doesn’t want to be handpicking parts of a solution from hundreds of individual suppliers," says Myers. "They want fewer suppliers providing full turnkey solutions."
Here are some tips to prepare your company for joining a global supply chain.
Open your books
Transparency is becoming the new norm in global supply chains. Be prepared to provide financial statements, a breakdown of your costing and details on your suppliers.
Protect your interests
All companies are vulnerable when customers fail to pay their bills. To protect your firm, Richardson says companies should have their receivables insured. EDC offers credit insurance to protect against losses when a customer cannot pay.
Richardson also advises to use letters of credit, a standard instrument for international trade transactions to ensure exporters get paid what they're promised.
Before going global, take the time to prepare yourself by getting advice from experienced, knowledgeable sources in Canada. This can ease the often arduous tasks of getting started, making connections and understanding laws and regulations in other countries.