Procurement managers ‘biased against SMEs’ (FT.com)

Procurement managers ‘biased against SMEs’
By Jonathan Moules

Published: August 8 2008 15:23 | Last updated: August 8 2008 15:23

Most procurement managers in large businesses are biased against small and medium-sized suppliers, believing them to be less competitive than their bigger rivals, research has found.

A detailed survey of 253 senior executives in companies with more than 250 employees found that 42 per cent would choose a big company over small and medium-sized enterprises (SMEs), which they felt were the more risky option.

Fifty-two per cent of respondents said they felt SMEs were less competitive than larger counterparts and 40 per cent said they would be less likely to choose a small supplier in a recession.

Many admitted that they put tougher conditions on smaller companies, with 53 per cent saying they expected a better overall service from SMEs than they did from larger businesses.

The research, commissioned by BT and Cisco, was intended to explore the factors influencing large businesses when choosing suppliers. The average value of procurement among the survey’s respondents was £28m a year, but only 23 per cent of this was allocated to SME suppliers.

Forty per cent of those questioned admitted that what a supplier chooses to outsource is a key factor in their decision making, with 26 per cent saying they would prefer to work with a company that did everything in-house.

John Dunsmure, managing director of the British Chambers of Commerce, said times had got tougher for small business owners in the wake of the credit crunch. “Smaller businesses are often the ones that are the first to be squeezed whenthere is a cutback,” he said.

“They don’t get paid on time or the company might use someone else. Lots of procurement people think smaller companies are high maintenance.”

But he argued that smaller businesses were often a better choice for outsourcers because they could often offer more flexibility and deliver orders that larger suppliers would consider too small to bother with.

“I would urge businesses to outsource anything that is secondary to their core business competence and invest their precious resources in what will help set them apart from the competition.”

Dunsmure’s views were at odds with those of the survey’s respondents, 57 per cent of whom felt that SMEs were not able to provide round-the-clock support, while 52 per cent felt small businesses were less able to provide competitive rates.
Copyright The Financial Times Limited 2008