How councils can save by supporting SMEs

16 May 2014 | Julian Young

Julian Young, CEO, Matrix SCMIf the government is true to its word, it will become progressively easier for public sector organisations to buy from smaller local businesses. It’s good for the economy, and offers cash-strapped local authorities better value for money and greater access to specialist services, which matters when needs can differ so widely from one community to another.

For local councils, SME suppliers offer a way to fulfil conflicting priorities – for example maintaining vital public services and safeguarding quality, while simultaneously cutting costs. SMEs don’t carry the same overheads and mark-ups as large corporate suppliers. And their services are typically more personalised and relevant to local needs.

So how can local councils harness more SME relationships?

1. To change the outcome you need to change the approach. If you keep doing the same things, it follows you will get the same results. Treat budget cuts as a catalyst for change – for example a new approach to procurement and supplier relationship building.

2. Look beyond the usual suspects. If existing products and services seem to be costing more but the quality is deteriorating, it’s probably time to look elsewhere. As the government continues to remove the barriers to more ad-hoc relationships with smaller companies, start looking for new sources. Fresh, local suppliers that are keen to prove themselves as a valid and competitive alternative to large incumbents.

3. To find new suppliers, look in new places. It’s getting easier to find and compare SME suppliers thanks to online procurement portals which connect specialist service providers with local authorities. These offer councils the chance to tease out the differences between providers, and to specify the more personal aspects to a service they need, inviting tailored responses from interested parties.

4. Learn from each experience. A good online marketplace will provide valuable statistics to the contracting authority too, so the purchaser can see very quickly if particular needs are not being met by the suppliers submitting proposals. Using this information a council can take proactive measures to drive up quality where it is lacking, and let would-be suppliers know of any service gaps.

5. Smooth supplier payments. A good online marketplace will provide cash flow safeguards for SME suppliers by taking the risk, so that even if a council is struggling to pay invoices in under 60 or 90 days, the business gets paid promptly.

Local authorities that strike up SME relationships have the satisfaction of knowing they are keeping money in the local economy, which can only be a good thing.

Julian Young is CEO at Matrix SCM

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