David is a small supplier that was selected to participate in a corporate enterprise supplier development (ESD) programme. Following the completion of the 12-month contract, he was replaced by a subsequent beneficiary of the programme. David has been trying to secure a further contract with the organisation (and with other organisations), but has no idea how to engage with his prospective clients, subsequent to the ESD initiative.
It is a situation familiar to Elmarie Goosen, owner and founder of On Purpose, an organisation that provides training to SMEs to complement supplier development programmes – to prepare SMEs to engage with corporate procurement. She unpacks what procurement can do to help SMEs, in this month’s SmartProcurement.
The status of SME integration in procurement
In an article Lebohang Thulo – the editor SME South Africa – remarked that “in light of supply development becoming more prominent in the ownership composition, skills development, enterprise and supplier development, management, control and socio-economic development, the intention of corporates to integrate SMEs has stepped up a gear.” She added that “more companies are integrating, in their procurement strategies, the concept of supply development. There is a more positive mindset around integration of SMEs into corporates’ value chains”.
Considering David’s dilemma, the question is, how can companies further prepare SMEs to engage with corporates, after the initial ESD programme?
With supplier development, the emphasis is on bringing smaller suppliers into the supply chain. In terms of procurement portfolio analysis, many companies fall within the Kraljic, Routine and Leverage supplier quadrants – which is where most of the procurement activity seems to be conducted. Awarding SMEs a 12-month contract is well understood, and happens often in the supplier development process. However, the SME’s continued engagement with corporate procurement and end customer, seems to be overlooked.
If we truly want to make supplier development sustainable, procurement, the supplier development lead and the end customers should be aware that the SME has most likely never done business with a corporate organisation before. Even if they had, they are probably unaware of how corporate organisations conduct business with each other. Yet, there is an expectation on the part of these organisations that all suppliers operate in the same way, and fully understand the procurement environment. The question is, what can be done differently to optimise enterprise supplier development?
Explain to the supplier what is expected
At request for proposal (RFP) stage, take time to explain to the SME supplier what is required, share your company brand promise and customer expectations. This will not only lead to a better RFP response, but also teaches the SME supplier to tailor their response to specifically address the brand and customer expectations. If a SME supplier understands the customer, and where they fit into the service or product, they can articulate their unique value proposition more accurately. This understanding allows the SME supplier to compete more effectively in the market.
Make time to not only give feedback, but also provide guidance and share best practice for future RFP responses. Remember that the SME does not have a bid team working on their proposal. These skills need to be developed for each individual SME supplier.
Develop a relationship with the SME
To facilitate the development of relationships between SME suppliers and the end customer, involve the end customer in the process, and help them understand the nature of the development being offered to the SME. Ask the end customer to identify areas where the SME may need support or training.
Often SMEs only have a relationship with the supplier development lead and procurement in an organisation, and are left to their own devices when engaging with the end customer. Remember that procurement is not the only customer. To develop end customer relationships, encourage bi-annual performance reviews, and invite SME suppliers to attend. These performance reviews also provide SME suppliers an opportunity to showcase their products and services.
Take time for orientation and onboarding
During the introductory stage of engaging the SME supplier, outline the organisation’s expectations and explain what they can expect from the supplier development process. Align the SME supplier with the organisation’s vision, mission and brand offering, and introduce them to the organisation’s history, culture, values and business objectives.
Onboarding allows the organisation to gather the documents and information required to set the SME supplier up as an approved supplier. It enables the organisation to effectively purchase goods and services, and make payments to the SME.
Set aside some time for someone from accounts payable to explain invoicing formats and procedures, and share the company policies. This will allow the SME to be more equipped to understand the organisation’s procedures, which – in turn – will allow them to engage more effectively and efficiently in the market place.
Ethical and responsible SME supplier development
It is ultimately the SME supplier’s responsibility to build relationships, develop their reputation and garner credibility. A good supplier development programme may provide SME suppliers like David the skills to so. However, developing sustainable relationships with SME suppliers, preparing them for-, and guiding them through their first few engagements with their corporate customer, is a responsible and ethical approach to development beyond the ESD programme.
For more information on how your procurement function can support SMEs, contact On Purpose’s Elmarie Goosen.