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How a shorter supply chain can boost sustainability and resilience

Supply Chain

When it comes to your supply chain, the shorter it is the more sustainable and resilient it will typically be. Not only that, shorter supply chains can also help you make a more positive impact on your local community.

Whatever your business does, one thing is for certain: if it can be done by utilising local suppliers and their workforce, it will be more economically, environmentally, socially and operationally sustainable than if skilled workers, contractors or products are simply imported from further afield or even from abroad.

Keeping your supply chain as short as possible by buying local has a number of distinct advantages, many of which stem from the fact that local companies are much more likely to be SMEs:

Innovation
SMEs are well recognised as innovators, and it’s not surprising when you think about it – they have to be in order to compete with their larger rivals. That innovation can significantly benefit your business, whether that’s by improving processes, implementing technological solutions, or cutting costs.

Flexibility
With their often flatter management structures, SMEs are typically much more agile and nimble than their bigger counterparts. That means decisions are reached much more quickly, and responsiveness is greatly improved.

Higher levels of customer service
Smaller companies simply value their customers more – usually because they have to fight harder to win them, and it impacts them more when they lose them. As a client buying from SMEs, you can expect them to behave much more like an extension of your own management team because they become much more invested in your success.

Lower costs
SMEs typically benefit from lower costs of operation – for instance, their lean management structures mean they aren’t tying up working capital in middle management salaries. And, if they’re based locally, then visiting or sending goods to you will cost less. These lower costs are passed on in the form of procurement savings.

Improved resilience
A supply chain that comprises a small number of large vendors is at risk when one of those vendors is temporarily unable to supply. A more balanced supply chain, with its eggs better spread in a greater number of baskets, will naturally be more resilient.

Greater supply chain sustainability
Sourcing goods and services from nearby vendors immediately cuts down on supplier miles, reducing costs and carbon emissions in the process. And those local suppliers are much more likely to source from other local companies too, extending the purchasing benefit even further into the community.

Job creation
Local companies are much more likely to be SMEs employing local people. Which means you’ll be contributing to maintaining and perhaps even creating jobs.

Of course, it isn’t always possible to buy locally. A green grocer, for example, is unlikely to be able to buy bananas from a UK grower because we lack the climate and other conditions to successfully cultivate this particular fruit, and so will always have to rely on imports. But where it is possible to source from local suppliers, it makes good business sense to do so.

The BAE Systems example in Lancashire

Lancashire is home to two sites operated by BAE Systems, one at Warton and the other at Salmesbury.

It is a significant contributor to the Lancashire economy, acting as an anchor for hundreds of business which have coalesced to establish a supply chain hub and make Lancashire a recognised centre of excellence for aerospace engineering and advanced manufacturing.

A report produced by Oxford Economics finds that BAE Systems was responsible for a total of 16,200 Full Time Equivalent (FTE) Lancashire jobs in 2013, including 1,600 in the immediate supply chain and a further 5,100 in the wider economy (through increased consumer spending of its own and its supply chain workforce).

That’s over 6,500 people whose jobs are in some way linked to the operations of BAE Systems.

Local, SME friendly procurement

To boost the local content of your supply chain, a good starting point is to set a target. Aim for a minimum 30% supply chain spend with local SMEs, and a stretch target of 50%.

In order to then hit those targets, it’s necessary to develop local, SME friendly procurement practices. Key is making sure that your procurement processes are simple, straightforward and accessible, and that they don’t inherently favour bigger vendors whilst putting smaller firms at a disadvantage.

And don’t forget to cut them some additional slack if they don’t measure up to your performance expectations straight away – you’ll benefit more in the long run by collaborating to help them meet your needs rather than chastising or replacing them too quickly.

Eradicating modern slavery

Another significant benefit to local sourcing is supply chain visibility.

According to the Walk Free Global Slavery Index 2013, some 29 million people around the world are affected by modern slavery, which includes trafficking, slavery and forced labour. Lengthy, global and complex supply chains often harbour examples of forced and child labour.

Maintaining shorter, UK and European supply chains can help to overcome some of the problems associated with modern slavery and, for obligated businesses with a UK turnover exceeding £36 million, can also help achieve compliance with the Modern Slavery Act 2015 which came into force last October.

If it’s possible to source a product or service from your locale, why buy it from further afield?

Burnley shale gas supply chain event

These themes will be explored at a meeting being hosted in Burnley, Lancashire, on the evening of Monday 9th October 2017 where local manufacturing and engineering businesses will get to hear first hand about the supply chain opportunities that a successful shale gas industry may one day be responsible for. Hosted by Lancashire For Shale, this is an invitation-only event. To register your interest in attending, email [email protected]

 

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