There are two types of fast growing SMEs (Small & Medium Enterprises). The ones that have had a cash crunch, and the ones that WILL have a cash crunch. Growing fast requires money. Money to finance trade credit, money to hire more staff, money to invest in machinery and overheads. Money, money, money! It’s at that risky stage some companies become victims of their own success. Customers love their products and services. And in an attempt to meet this booming demand SMEs run out of cash.
Procurement is essential to survival of fast growing SMEs
Before falling off the cliff, it’s crucial that business owners gain control of their costs and thereby retain control of their companies. Procurement is the place to look for help. The sophistication of the profession has transformed over the years. The business benefits Procurement can deliver are no longer reserved for large companies. More and more small business owners are recognising this according to a recent survey by eProcurement provider Wax Digital. It shows that SMEs are looking to Procurement for spend, contract and supplier relationship management.
Some may think spend levels of fast growing SMEs are too small to warrant the cost of buying Procurement expertise. After all, compared to large companies, what volume discounts could SMEs possibly get? But size does not matter as much as some think. What matters more is that total costs are managed well. Sometimes it’s desirable to pay more if it helps drive costs down elsewhere in the company. It’s the total cost picture that matters. To generate the most value, fast growing SMEs may need to adopt a different strategy to the supply markets than large companies. One thing is certain, however. Procurement is essential to the survival and sustained growth of SMEs.
Innovation, competitive advantages and risk management
Procurement can minimise unnecessary waste by applying innovative thinking to cost base management, without compromising quality. Procurement can ensure the right products and services are bought at the appropriate quality and total cost. In that way no money is left on the table.
Accessing business focused Procurement skills helps develop competitive advantages. This is not only true for large companies, but also at the early stages in a company’s life. Suppliers are keen to work with rapidly growing companies. Not because they spend a lot today, but because they will do so in the near future. The innovation of the best suppliers is available to these fast growing SMEs, and can become a source of competitive advantage. But it requires establishing and nurturing strategic supplier relationships. Something Procurement professionals are experts at.
Then there is the issue of risk. Supply contracts need to address key risks. Someone needs to negotiate these contracts, so SMEs minimise their liabilities and appropriate safeguards are put in place. Ignoring this fact could become very expensive indeed. Procurement professionals uniquely have both the commercial business insight and the required legal contracting skills to manage risks.
SMEs would never dream of not having anyone in charge of, say, Finance or Sales. Similarly, companies really cannot afford to ignore the need for Procurement expertise either.
Armand Brevig is the Managing Director of Procurement Cube. We have created an effective and lean Procurement product that unlocks hidden business value for SMEs. It’s a Procurement Powerhouse inside your organisation that delivers Value for Money, Total Cost Control and Enhanced Competitiveness. The approach builds fit for purpose capabilities that deliver sustainable strategic value. The focus is on what really matters in your unique situation.
