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Buying from SMEs: The Key Considerations

Considered by some to be the weakest link in any supply chain, SMEs might just be the stabilising factor we need in what’s shaping up as a turbulent decade.

For a few years now, I have contributed an article to Sue Barrett’s annual “12 Sales Trends” report. For the 2020 edition, my contribution was “The Modern Supply Chain: We Change or We Burn”. The article focused on the fragility of modern supply chains, pointing out that the last time our world came close to being as interconnected as it is today was the late Bronze Age. In fact, it was the complex nature of that era’s supply chain that was needed to procure tin and copper to produce bronze that contributed to its collapse.

Thankfully, COVID-19 is unlikely to lead to a similar downfall, but it has given us pause for thought. How do we make our supply chains less vulnerable to global events?

Supporting local SMEs might be the answer.

(Vendor) Size Doesn’t Matter

Only five years ago, Spend Matters was wondering if SMEs were the weakest supply chain link. It’s not an uncommon view, and it’s not entirely undeserved. But if the COVID-19 pandemic has demonstrated anything to the procurement industry, its that the biggest vendors do not reduce the fragility of your supply chain when logistics become an issue.

While the current pandemic may be viewed as a once-in-a-lifetime event, the coming decade is likely to throw up further challenges, with the various impacts of climate change at the forefront. So, it may well prove to be that the riskiest supply chains are the least diversified ones.

Giving SMEs Their Due Credit

Of course, we cannot buy from SMEs without due consideration. This is where government practice comes in handy, as they are large organisations with a mandate to buy from local SMEs where possible.

The NSW government has a well thought out guide for dealing with SMEs. Broadly, its key considerations include:

  • Keeping the contract value under a specific limit – always prudent practice, as SMEs often fail through gorging on contracts that are too big for them.
  • If the vendor has to grow to accommodate your contract, ensure that they can do so sustainably or at least have sound foundations on which they can grow and thrive.
  • Make it easy for SMEs to do business with you. Enterprise-scale companies might have the admin capacity to deal with complex procurement systems; SMEs do not.
  • Encourage innovation. One of the things SMEs can do that an enterprise cannot is take risks with their products and services. So, encourage your small vendors to get off the beaten track and discover new, mutually beneficial outcomes.
  • Finally, buy local, because the purpose of buying from SMEs is defeated if they have to ship you something.

We don’t know what the post-COVID-19 world will look like, but it has shown us how fragile our supply chains are. It’s a warning we need to heed. So, let Comprara help you diversity your supply chain by going local, and getting stronger.

This article was originally posted on www.comprara.com.au.

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