Based on the recent report City SME Supply Chains commissioned by the City of London, Abdul Rahim of Bone Wells Urbecon writes about small and medium enterprise (SME) supply chains.
By Abdul Rahim, Director, Bone Wells Urbecon Limited
For some SMEs, the perception is that selling to large corporations and institutions is the Holy Grail, especially those based within the City of London. But 98.5% of businesses in the City are small or medium sized enterprises, and they clearly offer a huge potential market for SMEs based in the City and the City Fringes to tap into. Selling to other SMEs should be easier than trying to navigate across the procurement procedures of large corporations.
We recently conducted research that focuses particularly on SMEs, and looks at supply chains and buying and selling trends between smaller firms within the City and also with other firms in the City fringes.
We found that 63% of firms in the Square Mile buy from other firms within the City. Whilst a similar proportion (68%) sold to other firms in the City, highlighting the importance of those local trade relationships. Some of the key reasons given for purchasing within the City included the proximity of businesses, speed of delivery and the expertise and reputation of the firms found in the concentrated industry clusters around the business district.
The effect of sales to other City firms by SMEs surveyed is dramatic, with more than one third of SME respondents’ sales to City firms accounting for more than half of their annual trading income.
But the majority (70%) of those firms who purchase within the City spend only a small amount of their total purchasing budget in the City (1-25%), so could more be done to encourage more buying and selling, supporting businesses in the local ecosystem?
Percentage of total buying (by £ value) from firms in the City
It is striking that the businesses that are most successful in selling to their neighbours make sales largely through personal contact in one way or another – ranging from word of mouth recommendations, to focusing direct marketing efforts on potential and established customers in the area.
This highlights the intrinsic value that formal and informal networks have to that sizeable segment of City and City fringe based businesses hoping to sell more to their neighbours; so finding ways to facilitate this networking is something that we believe the businesses themselves and business support agencies could usefully focus further efforts on.
In addition, many support programmes for businesses exist and range from helping businesses find access to finance through to research and innovation funding. Free guidance and information is available online and useful sites include:
Gov.UK, the central government portal where information for starting and running a business is collated www.gov.uk/browse/business
For fast growing companies www.growthaccelerator.com
The British Library Business and IP centre www.bl.uk/bipc/index.html
About Abdul Rahim
Abdul Rahim is a director of Bone Wells Urbecon Limited and one of the authors of City SME Supply Chains.