Strategic sourcing in SMEs

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By Kaunain Nurani, Director of Value Engineering and Dumisani Moyo, Head of Mid-Market: Southern Africa at SAP

Small and medium-sized enterprises (SMEs) are essential to Africa’s development and economy.

According to the World Bank, SMEs in emerging markets are responsible for the creation of 70% of formal jobs and are an essential part of economic development.

With many SMEs struggling to do more with less, the ability to manage financial pressures is essential.

Some SMEs can be reactive and use opportunistic cost-cutting measures that provide short-term relief, but are often destructive in the long term.

Successful SMEs choose to be proactive by using approaches such as strategic sourcing to drive cost reduction and efficiency.

Strategic sourcing

Strategic sourcing is a game changer. It harnesses the power of technology and data to meet a company’s procurement needs.

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By integrating organizational goals and unique market conditions, strategic sourcing creates efficiencies and predictability while contributing to cost savings.

Companies that use data-driven approaches are empowered to make credible decisions on supplier issues.

In this regard, SMEs need to have a holistic view of their procurement spending and be able to answer some basic questions: What am I buying? Who am I buying from? And how much do I spend?

By answering these questions, strategic sourcing enables companies to develop optimal strategies for purchasing goods and services – whether they are directly related to the production process or for internal use.

Today there are two essential ingredients for SMEs that want to reap the benefits of strategic sourcing:

First: leverage a network of digital suppliers

By entering a dynamic digital marketplace, SMEs are able to match their sourcing requirements with qualified and knowledgeable suppliers around the world. Above all, the more suppliers involved, the greater the source of purchasing power.

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With just a few clicks, a digital supplier network enables buyers to view their sourcing needs, compare offers from different suppliers, and make credible decisions about which supplier to buy from.

Leveraging a network of digital suppliers can be crucial in building long-term sourcing partnerships, thereby improving efficiency and reducing costs.

Two: innovative procurement tools

SMEs must have access to intuitive sourcing tools that enable the seamless creation, execution and management of sourcing events.

The use of tools such as electronic auction platforms is invaluable. Electronic auctions allow businesses to post their procurement requirements on an online platform and organize time-limited online events to secure goods and services at competitive prices.

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Manage sourcing in SMEs

Strategic sourcing is a good starting point for managing supplier relationships and is essential for increasing efficiency, reducing costs, and creating sustainable competitive advantage. As part of this series on Using Technology in Supplier Relationships, the next two articles will focus on operationalizing the supplier engagement process, as well as effectively managing the supplier experience. .

1. Strategic sourcing: it starts by finding suppliers, agreeing on the best prices and setting up contracts.

2. Trade automation: Next, the focus is on improving the efficiency, transparency and collaboration of the supplier engagement process.

3. Supplier experience management: The emphasis is then placed on continuous improvement through supplier experience and co-innovation to optimize processes.

Click here to download the Oxford Economics White Paper on Procurement and Supply Chain.

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