Big business holds key to survival for small firms

More than 600,000 small businesses are in the throes of retrenching, but big businesses could change the process by bringing those who could offer non-core services into the supply chains.

The secret lies in using “enterprise and supplier development” (ESD) to spend smartly in the coming months, said Dylan Baxter, head of sales at business incubator Raizcorp.

ESD’s goals are to assist in creating sustainable businesses, entrepreneur opportunities and job creation, especially in small and medium-sized companies. Skills transfer and wealth creation is an essential by-product.

Baxter said ESD could be a panacea to the economic devastation of Covid-19.

“Giving small businesses the opportunity to become part of larger companies’ supply chains will not only help the sector to recover in the wake of the pandemic, but it will also create a platform for sustained job creation and growth. In addition, it will help big businesses meet their B-BBEE targets during an economic downturn.

“Covid-19 offers a real opportunity for businesses to take a long-term view. It can help the economy recover and achieve its own ESD objectives and supply chain initiatives. As we emerge from the worst of the restrictions, businesses will need to start delivering on projects and starting up their operations. Using small suppliers to help them can play a major role in rebuilding the economy.”

Baxter said a good starting point for big corporations was to look at those goods and services that could be outsourced immediately with little risk to the business: cleaning, courier services, maintenance, security and even software development.

“This should be followed by identifying candidate businesses that have the potential to be included in supply chains, and grooming these businesses for supply chain partnerships.”

Before Covid-19 ESD was a long-term affair, building supplier capacity over five to seven years. While this created meaningful and sustainable businesses, it has now become more urgent to combat job losses and small business closure.

Deidre Nxumalo-Freeman, founder of DNF Consulting, said there was a subtle difference between traditional outsourcing, where companies give a task to a supplier, and the ESD model, where an SME effectively joins the supply chain.

Regarding job creation, DNF has offered hope to over 2,000 people who make a living off waste, from collection to recycling and disposal. She said DNF had agreements with many large East London companies to operate as a waste custodian, collecting and disposing.

Although this falls short of Raizcorp’s goal of getting companies integrated in a long-term contract, she said outsourcing offered the flexibility to work for many organisations.

Large companies going the ESD route may face teething problems. Among these is initial lack of control, communication challenges because the company is sometimes not on site, quality concerns, an impact on the culture and some employees fearing they may be replaced.

Baxter said it could not be left up to big business to drive the supply chain disruption and create a gap for SMEs. “For small businesses, the key right now is determining the new ‘what’ — product or service; the new ‘how’ — processes; and the new ‘where’ — distribution channels.

"They have to remain relevant and have the ability to identify and respond to opportunities needed by other businesses, both now and in the future.”

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