Supplier Development has been in the news lately primarily because it features strongly in the most recent revision of the BBBEE codes. However, for those who run effective businesses, Supplier Development is old news. In early May 2015 I visited the National Minority Supplier Development Council in New York, and was fascinated to learn why US businesses value the development of minority suppliers.
The Council has been operating and delivering value since 1973 with no BBBEE requirements or push from their government. The three major reasons why corporates engage and develop small minority-owned businesses is that:
- Diversification of the supply chain lowers risk as there is less dependence on a few suppliers.
- Small businesses value the business they are awarded and they are able to innovate due to their low overheads.
- Employees and customers alike are pleased to see that suppliers from their communities are being supported instead of large faceless corporates. This results in the retention of top performers and preferred customers.
I encourage you to visit the website www.nmsdc.org to see the long list of large businesses actively supporting small businesses. These companies measure the impact of their activities and record the return on effort and investment to deliver business value. I encourage South African businesses to do the same. Consider the benefits that can be realised from Supplier Development and treat it as a business process that needs to deliver results.
The Japanese automotive industry has been actively developing suppliers since before the 1970’s to the point where their value chains are collaborative engagements with value for all. These collaborative relationships require high levels of trust and understanding, with no room for bad treatment of either supplier or buyer. Small businesses are paid on time and sometimes up front so that they are not cash constrained, and expertise is shared openly so that delivery is of the highest standard possible.
I would like us to change the tone of the conversation when it comes to Supplier Development – from one of grudging compliance to that of real contribution to the bottom line. In our own organisation we have reaped the benefits of developing our suppliers as they have come with innovations that we could never have imagined, giving us an edge over our competitors. Our business is not huge and our managers get frustrated when large suppliers stand them up because our order makes little difference to them. When we buy from a small business they never let us down because our orders matter to them. We prefer those we can rely on and trust.
In essence, Supplier Development is not new. The Japanese have been developing their suppliers for decades, and methodologies like Just in Time supported Japanese manufacturers to become world leaders. Supplier relationships can be as important as customer relationships, as in a big business we want to know that we can rely on our suppliers and that they’ll be around tomorrow, and the next day. We cannot keep large inventories of input materials and need our suppliers’ deliveries to be synchronised with our demands. Sustainable suppliers need multiple year contracts so that they can hire great people, and finance equipment and technology.
The MEDO Supplier Development Programme – which is at no cost to the entrepreneurs – attracts applicants from across South Africa, and the team takes the candidates through a rigorous screening and interview process. In 2015 the Supplier Development Bootcamp will be delivered in Cape Town during which the entrepreneurs will undertake the grueling task of repositioning their businesses to become sustainable suppliers to large industry. The programme focuses on governance and scaling a business to meet demand, and culminates in a Supplier Showcase presentation session to private and public sector supply chain professionals. MEDO provides ongoing support with shared services, legal, accounting and marketing assistance, as well as introductions to markets.
Applications for the 2015 Supplier Development Programme running August this year open today – the 27th May 2015. Visit www.medo.co.za/entrepreneurs for more details.