Presented by SAP

Strategic sourcing in SMEs

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

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

According to the Worldbank, SMEs in emerging markets are responsible for creating as much as 70% of formal employment and are a critical part of economic development.

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

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

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

Strategic sourcing

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

By incorporating organisational objectives and unique market conditions, strategic sourcing creates efficiencies and predictability while contributing to cost savings.

Companies that employ data-driven approaches are empowered to make credible decisions on supplier-related matters.

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

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

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

One: Leveraging a digital supplier network

By accessing a dynamic, digital marketplace, SMEs are able to match their procurement requirements to qualified and competent suppliers from all over the world.

Importantly, the more suppliers that are involved, the greater the source of purchasing power.

With a few clicks, a digital supplier network empowers buyers to post their procurement needs, compare bids from different suppliers, and make credible decisions about which supplier to buy from.

Leveraging a digital supplier network can be crucial to building long-term sourcing partnerships, thereby improving efficiencies and reducing costs.

Two: Innovative sourcing tools

SMEs need to have access to intutitve sourcing tools that allow for the seamless creation, execution, and management of sourcing events.

The use of tools such as e-auction platforms is invaluable. E-auctions enable companies to post their procurement requirements on an online platform, and run time-bound online events to secure goods and services at competitive prices.

Managing sourcing in SMEs

Strategic sourcing is a good starting point for managing supplier relations and is an essential part of driving efficiencies, reducing costs and creating a sustainable competitive advantage.

As part of this series on leveraging technology in supplier relations, the subsequent two articles will focus on operationalising the supplier engagement process, as well as effective supplier experience management.

1. Strategic Sourcing: its starts with finding suppliers, agreeing the best pricing and putting contracts in place.

2. Commerce Automation: then the focus shifts to making the process of engaging suppliers more efficient, transparent and collaborative.

3. Supplier Experience Management: the emphasis then shift to continuous improvement through supplier experience and co-innovation to optimise processes.

Click here to download the Oxford Economics white paper on procurement and supply chain.

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Strategic sourcing in SMEs