Supplier development builds future strategic advantage
Big corporates can help change the current economic trajectory by growing small businesses
SA is one of the most unequal societies in the world characterised by high levels of unemployment. A slow growth economy is putting increased pressure on small businesses to create jobs. Despite growing spend on enterprise and supplier development, three out of four small businesses fail and only 10% will be around for more than a decade.
It is within this environment that supplier development has taken centre stage to create real opportunities for small, black-owned businesses to enter the market.
“More businesses need to understand that it’s in their best long-term strategic advantage to move beyond the legal imperative and realise they have a corporate and social responsibility to transform their supply chain,” says Catherine Wijnberg, co-founder of the Absa Business Supplier Development Awards and CEO of Fetola.
“To grow our economy we need more businesses to diversify their procurement practices and actively engage in real enterprise and supplier development initiatives.”
Supplier development, she points out, is a way to build future strategic advantage and, when coupled with stronger industry networks and a long-term view on supporting the successful growth of small suppliers, the result is future competitive advantage and a better future for all.
Established in 2018, the Absa Business Day Supplier Development Awards showcase best practice by acknowledging organisations with successful supplier development programmes that are making a positive impact beyond simple scorecard compliance. The awards celebrate companies that have committed themselves to building inclusive, transformed and thriving supply chains.
Past award winners include Distell (the 2019 overall winner); Massmart (the 2018 overall winner); SA Breweries; Property Point, a Growth Point initiative; Accenture; Exxaro Resources; Macsteel; Hatch Africa; Sappi SA; and Reapo SA.
- Read more about the 2019 winners here.
A recent event held in Sandton, Johannesburg, celebrated the 2019 award winners and put the spotlight on how organisations are using supplier development to secure the country’s future as well as highlighted the opportunities inherent in the journey.
The discussion focused on three areas: how to future-proof supplier development, including new products and solutions in the supply chain; how to widen the net of opportunity through expanded ecosystems; and how cost savings and efficiencies can bring suppliers closer to corporates, allowing for improved integration, mutual understanding and process re-engineering.
Rather than regarding BEE legislation as a box-ticking exercise, those organisations with winning supplier development programmes understand that they need to undertake the journey responsibly and use supplier development to ensure their organisations are ultimately more resilient and better positioned for the future. The reality is that the future of suppliers becomes irrelevant unless corporates themselves are sustainable.
Most corporates are risk averse and prefer to avoid dealing with small and unknown suppliers. However, given an economy under pressure, one of the few ways to change the current trajectory is to grow small businesses. The economy is unlikely to grow if it’s only large and established businesses that pick up contracts.
Though most organisations don’t share industry trends with their suppliers, there is value in co-creating with suppliers and together finding better ways of working.
More businesses need to understand that it’s in their best long-term strategic advantage to move beyond the legal imperative and realise they have a corporate and social responsibility to transform their supply chainCatherine Wijnberg, co-founder of the Absa Business Supplier Development Awards
While supplier development programmes are typically referred to in the context of BEE, 2019’s winners were united in their belief that successful supplier development transcends legislated compliance.
Critically, the majority measure their return on investment and downstream economic impact of their supplier development programmes. Interestingly, many companies with successful supplier development programmes are using supplier development for their own long-term competitive advantage.
While most corporates have traditionally operated in silos, a current trend is seeing supplier development moving out of an organisation’s corporate social investment arm into its own division. At its essence supplier development is about creating value beyond the BEE scorecard and points.
Successful supplier development programmes understand the intent of the programme and have factored in future sustainability and their strategic capabilities and then build programmes based on their commercial viability.
Cost savings and efficiencies
Cost savings and efficiencies are easier for larger organisations to achieve given the economies of scale. However, it is possible for smaller organisations to achieve cost savings and efficiencies if they are able to collaborate with larger organisations and if they use technology to bridge gaps.
The discussion highlighted the fact that organisations need to be able to distinguish between costs that add value and those that don’t and be careful of not eliminating costs that add value.
Small businesses need to be set up for future growth. This includes being trained in terms of how to engage with large corporates as many currently don’t know how to position themselves and adopting the appropriate operational processes. Furthermore, small businesses should be encouraged to request a gradual transition period to on-board their services.
The issue of return on investment and impact needs to be addressed from the outset. Companies with successful supplier development programmes tend to be very deliberate about their required impact and value which builds accountability into their programmes. Critically, corporates need to be prepared to walk the journey with smaller suppliers if they hope to establish successful supplier development programmes.
There is a misperception that doing business with a small business comes at a cost. Organisations with winning supplier development programmes agree that the ability to tell a positive story has a ripple effect and tends to resonate positively, which is why measuring the economic effect of any programme is vital.
Entries are now open for the third annual Absa Business Day Supplier Development Awards. This year 11 awards will be made, with two new categories included.
Entries close on February 17 2020.