One of the major changes that large companies have taken in responding to President Donald Trump’s import tariffs has been diversifying their supply chains — when possible, finding domestic partners in the process. Despite the opportunity to benefit from those efforts, a new study shows that small businesses still aren’t reaping their share of the windfall — but offers ways for entrepreneurs to be more successful in the future.
That insight comes from the new “Scaling Small: Inside the Enterprise Push to Source Smarter and Stay Competitive,” a report shared exclusively with Inc. by Supplier.io, a data intelligence company that helps businesses searching for supply chain solutions identify optimal partners. Its survey of 150 enterprise executives found a whopping 96 percent of respondents said they want to work with more small businesses as suppliers. At the same time, participants said their companies spend an average of just 7 percent of their procurement budgets on modest-sized firms. One reason for those clashing numbers comes from the 41 percent of managers who reported that a smaller supplier they’d been using had failed within the last 12 months.
Despite the unexpected closures of those partner business closures, most large firms have been pleased with the results of working with entrepreneurial suppliers. That explains why so many are now looking to shift more of their procurement activity away from big companies that traditionally dominate supply chains.
One reason for that contentment is that 56 percent of surveyed executives said they’ve benefitted from improved quality and performance from small businesses they’d chosen as suppliers. Other returns on that investment included enhanced supply chain resilience cited by 53 percent of respondents, and reduced costs mentioned by 50 percent of participants.
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As a result, the survey found 91 of participating executives said they’ve already adjusted their procurement strategies in response to import tariffs to include more small businesses, or plan to do so soon. As part of that, 71 percent of respondents said they’ll be boosting their spending with U.S.-based small suppliers, with nearly a third of participants describing those increases as “significant.”
Indeed, 20 percent of companies involved in the survey said their spending on smaller suppliers already represents 16 percent of their procurement budget, contrasting the overall average of just 7 percent.
Still, the rate of large companies working with smaller businesses is far lower than their stated desire to do so. According to Supplier.io founder and CEO Neeraj Shah, that disconnect is largely due to bigger enterprises lacking both the data and networks needed to find prospective modest-sized supply chain partners. Even when they do, he adds, they aren’t able to fully substantiate the reliability and financial stability of smaller firms.
“Procurement teams know the big players in areas they purchase, but finding and vetting reliable small suppliers requires organizations to go well beyond online searches and the top ten industry leaders,” Shah said in emailed comments to Inc. on the study. “The barriers are also baked into enterprise sourcing processes. A third of executives say their onboarding systems are too rigid for smaller suppliers. Another 25 percent point to unclear vetting processes, and 23 percent admit they don’t have reliable performance or risk data. Those roadblocks keep companies from scaling their intent into action.”
That, in turn, is preventing entrepreneurs from fully benefitting from the growing number of large companies that want to work with small business suppliers.
The key to more small business suppliers getting in on that activity is in becoming more visible to the larger companies hoping to work with them. One way of doing that is to get involved with Supplier.io or other procurement platforms that specialize in matching partners on both sides of the supply chain.
“The biggest issue we hear from large companies is that they simply can’t find the right SMBs in the first place,” Shah said. “Increasing visibility is critical and small suppliers need to make sure they show up in supplier databases and intelligence platforms so enterprises can discover them. SMBs can make themselves easier to work with by proactively documenting certifications, compliance status, and past performance, and by making sure they are digitally ready to integrate with procurement platforms.”
Another advantage of taking those steps to be more visible to businesses seeking to diversify their supply chains is that entrepreneurs can reassure potential large company clients about their stability. That’s a big concern for the executives who said they’d seen a modest-sized partner collapse within the last year.
Among that cohort, 66 percent of respondents said small business supply chain partner failures had cost them — over $10 million in losses on 46 percent of those cases. Nearly 50 percent of participants said those collapses had forced them to delay major project or product launches, with 48 percent reporting dissatisfaction from their own customers as a result.
So in addition to taking steps to ensure they appear on large companies’ procurement radar screens, small business suppliers can also help themselves by providing data that establishes their trustworthiness with potential customers.
“Small suppliers that demonstrate transparency and some capacity to scale, build confidence,” Shah said. “That means comprehensive discovery databases to find qualified small businesses, continuous performance and risk monitoring instead of point-in-time surveys and streamlined onboarding that reduces friction without cutting corners on compliance. With the right intelligence and automation, small suppliers can be assessed and scaled with the same discipline as any other strategic asset.”