How small businesses can take advantage of on-shoring and deglobalisation

Here, Duncan Brock explains how UK small businesses are in a great position to take advantage of the current political climate.

Unsurprisingly, Brexit is creating uncertainty within the European market

Unsurprisingly, Brexit is creating uncertainty within the European market

Often in business where there is a challenge for one there is an opportunity for another. Recent economic and political events are causing a great deal of uncertainty for UK supply chain managers – creating an environment in which the UK’s small businesses have the opportunity to win more supplier contracts from large organisations. However, some small businesses are unaware of the opportunities or feel the tender processes of large companies are too complex for them to win. By changing this attitude and being fully prepared, UK small businesses are in a great position to take advantage of the current political climate.

Unsurprisingly Brexit is creating uncertainty within the European market. As the UK begins to renegotiate new trade deals, the UK’s trade links to Europe are likely to come under strain and be open to increased risk. President Trump’s protectionist policies are also threatening to fuel a wider stalling of globalisation. These factors contributed to global supply chain risk growing to a record high at the end of 2016 as the CIPS Risk Index rose to 82.64, from 79.14 at the end of 2015. The figures put global supply chain risk at the highest level in 24 years. This has created a unique opportunity for UK SMEs. The growing sense of supply chain risk has made reshoring ever more attractive for international businesses. Therefore, UK SMEs now offer more security and can put themselves in the running for supplier contracts which may previously have gone abroad.

At the same time, the UK government’s White Paper reinforced its commitment to ensuring a third of its total procurement spend is with small businesses by 2020. Together these trends leave UK SMEs in a prime position to bid for new work usually reserved for larger international competitors. However, large organisations often have extensive governance structures and approval processes which may prevent many SMEs from bidding for contracts. The invitation to tender process, in particular, overawes some SMEs. By being fully prepared and familiar with the way in which large organisations operate, SMEs can put themselves in a strong position to win lucrative contracts.

For SMEs to be successful in bidding for tenders it is essential that they are aware of the following critical parts of the process: the tender process, negotiation and intellectual property ownership.

The tender process

When writing a tender a small business should always bear in mind the criteria and priorities of the business it will be supplying to. Attention to detail is also paramount. There may already be a strong relationship with the budget holder but the tender will also be analysed by a raft of people who the supplier may never meet. For these individuals the written response is the only information they have, so make SMEs should be sure to make it count.

It is always useful for SMES to create a checklist of the documents that need to be included. The tender documentation can often be varied and complicated, and all it takes is for one document to be missing for the application to become void.

Negotiation

Negotiation will typically be undertaken at shortlist stage and will involve contract and pricing negotiation. Having a secure and confident starting point is key to a successful negotiation. By being aware of the competitors pricing and overall market competitiveness, small businesses can avoid pricing themselves out of the running before the negotiations have even begun. It also helps to be consistent and provide clarity on why concessions could be made.

Intellectual property ownership

It is important for SMEs to have the terms of the contract at the front of their mind throughout the length of the agreement. Intellectual Property Ownership in particular is an area where some small businesses have difficulty. Many small businesses fail to realise that any product specifically designed for their client will become the client’s property. To avoid confusion and disputes it pays for SMEs to always be vigilant to what they have signed up for. Most importantly small businesses should ensure they are able to honour the contract throughout the term of the agreement.

While these are all essential factors in the tender process, part of the challenge for SMEs is putting themselves in the position to bid in the first place. Small businesses need to have the confidence to put themselves forward as an option, but there is also a need for small businesses to change the perception of what they are capable of. Some large organisations may believe that small businesses are unable to fulfil contracts because of their size, but by being confident and willing to ask for help businesses have the opportunity to promote their capabilities. In fact SMEs can often provide greater flexibility, a more personal service and are more open to change than larger suppliers. In the current climate, having an SME supplier with the local knowledge and determination to provide a good service should be a valuable commodity for supply chain managers.

To challenge these perceptions it is important that UK SMEs’ widen their view of potential opportunities and seek to become more visible. Supplier portals are a useful tool to allow collaboration with vendors in a secure environment. SMEs need to research opportunities thoroughly and develop directories of under-represented groups.

As ever, networking is a crucial part of gaining visibility. Events and face-to-face networks are a great way of building relationships, but it is vital that SMEs go into these events with a clear strategy of what they would like to achieve. Social media also provides an opportunity for SMEs to tell their story and display their capabilities to a wider audience.

The opportunities for SMEs to win tender contracts are diverse. The Ministry of Defence announced last year that it had built a network of supply chain advocates to encourage SME engagement; equally now the Department of Education runs innovation days where SME suppliers can meet and showcase their capabilities. De-globalisation is seen by many as a negative trend, but if small businesses move fast and are fully prepared to make the most of the current environment they can play a crucial role in ensuring the continuity of supply chains in a post-Brexit world.

Duncan Brock is director of customer relationships at the Chartered Institute of Procurement & Supply

Further reading on procurement

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