Local supply chains are great, but they must be competitive

Shaun McCarthy
21 March 2014

21 March 2014 | Shaun McCarthy

Shaun McCarthy, director of  Action SustainabilityI have long been an advocate of local procurement. It makes sense on a lot of levels, primarily supporting the local economy, jobs and skills but also reducing carbon emissions and improving workforce welfare for people providing services to travel less and spend more time with their friends and family.

I started my first local procurement initiative around Heathrow Airport in 1995 with Ian Heptonstall, who would become my co-director in Action Sustainability (www.actionsustainability.com) 10 years later. Together we have continued to pioneer ways of supporting local communities and economies through procurement ever since.

I was pleased to read about the success of the Welsh government in procuring more locally. Wales has unique social and economic challenges and recycling the investment in much needed infrastructure to the local business community is welcome. This model of joined-up, collaborative procurement and promotion of opportunities for local business merits replication elsewhere.

However, I need to sound a cautionary note for anybody considering replicating the excellent Welsh model. If you draw from a relatively small pool of suppliers, there is a danger that non-local suppliers become disillusioned and refuse to bid. This can have a positive impact in growing businesses within the community. But it can also have a negative impact in that these businesses become less competitive if they believe they are in a strong position. Careful development of the supply chain is necessary to ensure long-term economic stability and the necessary competence to support the ambitions of the region.

Purchasers have the challenge to achieve local and competitive. While the technique of breaking contracts into smaller lots makes sense to encourage small businesses to win new work and grow, there is also an opportunity to look to larger contracts to be big enough to encourage inward investment by businesses prepared to set up in the local area, establish competitive supply options and employ more people. Small businesses are important but it is important also to attract businesses with larger balance sheets and working capital to contribute to the economy.

This is not an either/or situation, it is an “and” issue. To use purchasing power effectively in a local economy it is necessary to promote competitive business through small local businesses and encourage investment by larger ones.

☛ Shaun McCarthy is director at Action Sustainability

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