Stronger supply chains for SMEs
If you’re emerging from lockdown into a slightly different supplier landscape, you’re not alone. Some familiar faces might have ceased trading, and some new names might have entered your space. For your supply chain, it means there might be new vulnerabilities and surprising opportunities to be aware of.
This article suggests four priorities for SMEs looking to rebuild – including mapping out your supply network, sourcing specific expertise, getting support from big firms and building alliances that can help you ride out fluctuating demand over the next 12 months.
We’re kicking off with supply chain expert Magnus Dimming. Magnus is global category director at BAE Systems and has 19 years of procurement and supply chain experience in several industries such as automotive, aerospace and defence.
Lean on the big firms in your supply chain
With thousands of SMEs in their own supply chains, BAE Systems is well tuned into its dependence on and responsibility to the wider business ecosystem. Any business is likely to have at least one big name in its network, upstream or downstream. Whether you’re making soap for supermarkets or buying ingredients from a national wholesaler, those big players should be there to support you during tough times.
Magnus urges SME leaders to lean on the big companies in their network. “Talk to your biggest customers and suppliers to see what they’re doing to help. There’s probably more support than you think. We’re always looking at new ways to support the SMEs we work with and I know other big firms are doing the same. There are things they might not have communicated that well, so you don’t know about them yet. Reach out and ask, sooner rather than later.”
“We have more than 4,000 SMEs in our UK supply chain. If they’re doing well, we’re doing well.”
Look for opportunities to share buying power
One of the ways BAE Systems is helping the SMEs in its supply chain is by passing on its buying power. A small business can’t get the same price breaks from a wholesaler or a manufacturer, because it orders in smaller quantities than a big business. This forces SMEs to squeeze margins or raise end-customer prices. Buying power can also affect lead times, determining a business’s ability to be agile and responsive – particularly important in periods of unpredictable demand.
“When we strike global buying arrangements for electronics and raw materials, such as recently with aluminium, we always try to bring in our SMEs on the agreement. For example, we have seen extended lead times on aluminium orders of up to 20 weeks. Through bargaining power, we’ve managed to get that down to just a few weeks for ourselves – and all the small businesses we work with. I urge big businesses to look for opportunities to do this and SMEs to seek out relationships where this is offered.”
Collaborate to map your supply chain
At first glance your business might have a short, fairly simple supply chain. But a thorough mapping exercise goes beyond looking at your first-tier suppliers – you also have to assess your suppliers’ suppliers, and possibly their suppliers. As you create your map, you’re assessing a number of factors including: financial stability, exposure to risk, potential bottlenecks, reliance on single suppliers and companies with long lead-times.
“Understanding your supply chain, especially your sub-tiers, is crucial,” said Magnus. If you spot a weakness, such as over-reliance on a single supplier, you need to take action, prepare a back-up. Again, talk to the big players in your space, they have valuable market knowledge and can help you find new suppliers. Mapping a supply chain can be time-consuming. You can save legwork by tapping into collaborative communities that share a central source of verified supplier data.”
“We have dozens of mentors at BAE Systems that are really keen to help SMEs. They can give realistic and practical help based on years of supply chain experience across all kinds of sectors. We really do want to help.”
Consider specialist supply chain expertise
Supply chain management often falls under the remit of an operations manager – or if you’re a small business it’s another hat for the MD to wear. SMEs rarely dedicate specific resource to evaluating suppliers and negotiating contracts with vendors. But for some businesses, it might be a skillset that’s worth bringing in, particularly over the next few months as SMEs drive for efficiency, form new partnerships or revisit temporary payment arrangements made under lockdown.
“Get a supply chain professional,” Magnus added. “Even if it’s part-time or on a consultancy basis, you’ll make savings. Someone who knows the dynamics in your market can look at your capacity, your inventory, your gaps and give you a 12-month capability forecast. They’ll also support you through supplier onboarding and carry out deep due diligence. A specialist can also advise you on opportunities for automation: how to reduce human error, drive down costs, and free up physical space.. These are things that any size business can benefit from.”