Working with SMEs in the supply chain

In today’s world, small businesses are anything but small fry. Accounting for around 90% of all organizations and more than 50% of employment worldwide, SMEs have become key players in the global economy, shaping and influencing markets across all sectors.

For big corporates and multinationals, partnering with SMEs in the supply chain is a strategic move that fuels growth and innovation. Using smaller suppliers encourages new and diverse ways of thinking, mitigating the risk of your business getting stuck in old, familiar patterns. Instead, with their fresh and creative approach, SMEs provide the unique ideas and solutions that move things forward.

Compared to their larger counterparts, small suppliers are also more willing and able to adapt their operations to meet specific requirements, providing specialized or customized services for partners. Their agile and flexible nature leaves larger organizations better equipped to meet the ever-changing needs of consumers.

Further to this, many SMEs are embedded in local communities, often acting as an important source of employment. Working in true partnership with smaller businesses in your supply chain therefore demonstrates a commitment to corporate social responsibility, with the potential to bring positive impact to local economies.

It’s clear that supply chain partnerships with small or specialist businesses can provide huge benefits for larger buyers – and the same goes for the supplier, who receives financial support, enhanced brand reputation and the chance to grow and scale in return.

However, many organizations still fail to engage effectively with SMEs. Complex procurement processes and inflexible payment schedules tend to preclude smaller firms from bidding in the first place; while uneven power dynamics and conflicting risk perceptions cause frustration and undermine working relationships.

What’s needed is an open and thoughtful approach to supply chain management that levels the playing field and attracts SMEs. This includes building and maintaining long-term partnerships based on transparency, loyalty and open communication – allowing both supplier and buyer to achieve their goals.

By introducing key standards to their supply chain process, corporations can establish positive working relationships with smaller suppliers, enjoying the innovation, variety and growth that they provide. 

A great place to start is with ISO 28000, the world’s foremost supply chain security management standard. ISO 28000 enables business owners to establish and implement a security management system (SMS) that will protect people, goods, infrastructure, equipment and transportation against security incidents and other potentially harmful situations.

The principal of the standard is to implement a best practice framework that serves everyone in the chain. System-wide collaboration is vital to its success, with all parties sharing information that leads to enhanced knowledge across the chain. Here, standards such ISO 44001 and ISO 44002 can help.

ISO 44001 defines key requirements to develop and manage contractual relationships, while the newer ISO 44002 provides in-depth understanding of these requirements, helping organizations to implement them effectively. Both offer valuable guidance on working collaboratively with partners of all sizes, enabling businesses to build towards a supply chain in which all parties share responsibility and approach risk management appropriately.

A collaborative approach is also needed to drive sustainability efforts across the chain. Becoming ISO 14001 compliant is advantageous, allowing you to introduce an environmental management system to help meet regulations and optimize performance. Establishing and communicating expectations through a supplier code of conduct is a critical step in involving smaller suppliers – as is having a healthy working relationship where all parties collaborate to establish sustainable practices that benefit everyone.  

Executive teams should also consider using ISO 20400 to introduce sustainable procurement processes. The standard defines key principles, such as accountability, transparency, respect for human rights and ethical behaviour, encouraging buyers and suppliers to work closely together for a better result for all.

Finally, cybersecurity in the supply chain requires a coordinated effort to reduce risk. Organizations must implement safeguards to ensure their information assets are secure, for example by building an information security management system in alignment with ISO 27001. This standard ensures appropriate measures are in place to manage security within the entire supply chain, outlining acceptable practices for supplier cybersecurity management.

Now more than ever, it’s important for large organizations to review their supply chain, working harder to encompass smaller suppliers. Adopting standards for supply chain systems allows businesses to support sustainable relationships with SMEs, building strong, long-term relationships and delivering significant value through an integrated and collaborative approach.