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Second-Tier Supplier Relations: More Than Just a Foot in The Door

Developing relationships with corporations that value supplier diversity can happen in many ways. Landing a direct first-tier supplier contract with a company is the ideal supplier relationship for most diverse-owned businesses. However, as large companies move toward strategic sourcing to increase their cost savings and efficiency, the environment is becoming more competitive for diverse business enterprises and the viability of second-tier or indirect contract opportunities.

Strategic sourcing – the practice of buying more products and services from a smaller pool of businesses – has yielded larger national contracts, provided direct manufacturer pricing and bundled services into fewer contracts for corporations. There have been many proposed solutions for diverse-owned businesses to retain their competitiveness in this arena – for example, joint ventures and strategic alliances are successful and increasingly popular ways to create diverse-owned businesses with combined scale and capabilities that can compete and increase diverse supplier inclusion.

As you look to pursue new contracts and RFPs, don’t confuse second-tier with “second class.” If the best way to develop a relationship with a corporation is through a second-tier or indirect supplier relationship, consider the following questions as you review the opportunity:
  1. Are you more concerned with who is first-tier, or with the work and revenue your company can acquire?
  2. How can your second-tier relationship allow you to expand business with a corporation or client?
  3. Can you replicate the partnership for other business opportunities?
  4. How do you mitigate risk as a second-tier supplier?
  5. Is your organizational culture and style aligned with that of the first-tier supplier in delivering a product or service to the client?
  6. Can your organization gain experience from this opportunity?
Recognized as a best practice in supplier diversity, many corporations have robust second-tier initiatives structured to facilitate diverse supplier inclusion.

Wells Fargo defines second-tier suppliers as subcontractors hired by a first-tier supplier under contract with Wells Fargo to provide goods and/or services. This approach provides business opportunities for companies that may not currently qualify as a first-tier supplier, to gain experience and help build relationships with the corporation contracting for services, which may lead to potential first-tier supplier opportunities in the future.

Learn more about Wells Fargo’s Second-Tier Supplier program.

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