When you’re engaged with the management of a business, the tasks associated with procuring reliable services come full with their share of challenges, and this is true no matter how large the organization is that you are working for. With that acknowledgment out of the way, it should come as no surprise that the tasks associated with procuring services for a Fortune 500 company are fraught with potential hurdles. Even more haunting is the potential for procurement mistakes to resonate throughout such vast operations, so every ounce of caution should be exercised before any decisions are made.
For starters, to be ranked amongst the Fortune 500, regardless of position on the list, means that a company is both undeniably massive and an unqualified success. In 2019, the occupant of position number 500 on the list, the venerable Levi Strauss, accumulated more than $5.5 billion in total revenue. In the process, Levi Strauss beat out the 501st company - Avon Products - by only $4 million to earn its spot on the cherished grouping of gargantuan moneymakers. To further put that into perspective, modern corporations can’t even sniff distinction as a Fortune 500 company without amassing revenues that exceed the GDP of nearly 20 percent of the world’s countries.
Collectively, Fortune 500 companies account for two-thirds of the U.S. GDP, which amounts to $13.7 trillion in revenues to go along with $1.1 trillion in profits and $22.6 trillion in overall market value. They also employ 28.7 million people worldwide, which means that the composition of workers employed by Fortune 500 companies, if lumped together as a single nation, would rank as one of the 50 largest countries in the world in terms of overall population.
Common challenges and solutions
Because the size of Fortune 500 companies necessitates the acquisition of outside services on a massive scale, many service providers justifiably salivate at the prospects of securing contracts with one or more entities on the Fortune 500 list. While there is indeed value in having so many potential vendors clamoring for your attention, and the reality that inking a contract with your organization can stamp their company’s entire year as successful, being the proverbial belle of the ball also comes with its fair share of risks that Fortune 500 employees must address if they are going to act responsibly on behalf of the companies they serve.
There are a few tried-and-true strategies that Fortune 500 companies employ to mitigate their risks. After all, business entities of this size can’t afford to make basic sourcing mistakes, particularly when rudimentary errors can result in failures by these companies to match the revenue targets they’ve advertised to investors. And, when you consider that roughly 330 of all Fortune 500 companies are also included in the S&P 500 during an average year, this is not a concern that is easily dismissed.
One of the strategies the Fortune 500 companies regularly employ to locate quality service providers involves the use of purchasing agents. This practice typically mandates the visitation of potential vendor facilities by the purchasing agents to verify the qualifications of those vendors before they are approved. This is usually a time-consuming process given the steep financial price to be paid for erroneously approving of a vendor that failed to live up to expectations.
Trade shows are another commonly utilized tool employed by Fortune 500 companies for identifying potential service partners. Generally speaking, certain relevant industry trade shows are commonly attended by buyers from the largest companies, so trade show participation can be an effective means of getting a foot in the door with Fortune 500 companies. This means that, if all else fails, your organization can pull out all the stops and entice high-end clients with an impressive display at a relevant industry trade show. In fact, if you have booked a booth at a trade show and are able to acquire the names of the attending buyers from the companies you are trying to impress, you can preemptively contact them to set up meetings inside of your trade-show booth. This is just one way of ensuring that you make the most of your trade show investment.
While all companies may one day find themselves facing public and private pressures to work with vendors of diverse backgrounds—including diverse genders, ethnicities, races and even military-service designees—it is often the largest businesses that are placed under the greatest pressures to make strides toward advancing diversity. This is partially owed to the ubiquity of their brands and their easy identifiability, which sets them up for the greatest potential public backlash if they fail to meet expectations in these areas. Therefore, if your company is certified as a minority-owned, woman-owned or veteran-owned business, it can become a very attractive partnership target for Fortune 500 companies, and all the more enticing if the quality of the work you perform is also superlative.
Please remember, the key word in play here is “certified.” Even if your organization matches all of the requisite criteria to advertise itself as a business that is either minority or woman-owned, it must have that element of its structure authenticated by a reputable third party in order to claim the rights that accompany that declaration. Therefore, you should be sure to file all of the necessary documents at the earliest possible date in order to secure the most advantageous positioning for your business.
Of course, Fortune 500 companies can’t rely exclusively on preferred vendor checklists or having the good fortune of stumbling upon ideal partners at trade shows. In light of this, these massive corporations are also exploring tech-based solutions to solve their service-procurement challenges. All of this is part and parcel to the endless quest of laboring to improve efficiency, automate as many processes as possible, and maximize savings.
Even tech giants like Oracle—a Fortune 500 company in its own right—have developed programs like Oracle for Startups, which is designed to forge connections between innovative tech startups and massive corporations that can make use of their worthwhile products. This allows Fortune 500 companies to bypass the hordes of service vendors clamoring for their attention, and to instead focus on the vendors that have been thoroughly vetted and endorsed by other large corporations that have staked their reputations on identifying reputable providers with whom to hash out agreements.
It’s all semantic
While designation as a Fortune 500 company carries a deserved air of credibility alongside it, the reality is that the next 500 revenue earners in the U.S. are likely to face similar difficulties when it comes to the area of procurement. After all, the number 500 is a somewhat arbitrary cutoff point, and the companies numbering 900 through 1000 on Fortune’s list collectively average revenues in excess of $2 billion. In essence, this means the procurement challenges are probably very similar for all companies that earn in excess of $1 billion annually. In addition, it accentuates the value of employing the aforementioned strategies to win both the trust and the accompanying service contracts that are awarded to companies that successfully market their services to America’s most massive corporations.