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Every Procurement Action Has a Human Reaction.

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Big business may not place the support of small business high on it’s agenda, but procurement has a key role to play in keeping a vital ecosystem functioning and thriving.  

In the UK alone, small businesses accounted for 99.3% of all private sector businesses at the start of 2015 with 99.9% of those being considered small or medium-sized enterprises (SMEs), according to statistics from the FSB, an interest group for small and medium-sized organisations.

 

This means that not only do these small and medium-sized businesses form a significant portion of the UK’s supply chain they also employ a lot of people. In fact the FSB estimates that around 15.6 million people are employed by such businesses. This is significant in a wider context - the sort of thing you might consider when electing a government, for example. 

 

SMEs are known for being agile and able to respond to the changing demands of their customers quickly and efficiently. They are also known for their ability to deliver new innovations. But while they might be forward-thinking and able to act quickly, being small means they are often less able to deal with the consequences of being squeezed on costs or from delayed payments quite as well as bigger businesses are and that kind of occurence can have far-reaching consequences through their workforces.

 

Indeed, I was told recently by one executive about an instance where one particular delayed payment had caused them all kinds of trouble —a familiar tale, no doubt. After being told that a bill would be paid on time by a customer, it subsequently never turned up. Having had a long relationship over a number of years the manager in question trusted them at their word when they said that the payment would be made soon enough. They even went so far as to cover for them with their own finance department. The new payment date came and went and no money appeared. The result was a disciplinary for the manager and the loss of trust between that manager and the customer. That bond of trust has also been broken for any other customers.

 

This decision not to pay on time may have kept some cash in the customer’s business bank account for a few extra days but it put at risk not only the manager’s job but also the financial health of the supplier itself and the long-term relationship between the two businesses.

 

With all the talk of savings and KPIs procurement can sometimes forget that there are real people with real lives who suffer the real consequences behind their decisions. It’s time for the function to really think about the human-side of its decisions —it’s not simply enough to point the finger at the finance function’s policy. 

Tim Burt
Posted by Tim Burt