Reliable supply at competitive pricing – can we make that work with local markets? Yes, we can.
Likely you can share one or more of the following experiences:
“I used to get certain vegetables from a local farmer, suddenly he stopped supplying.”
“I have tried to help so many small farmers to supply our hotel, I am tired of the repeating efforts.”
“Every time we receive supplies we have quality issues.”
It’s not to my surprise, local procurement needs an appropriate approach. Let’s see how it can work.
I remember times when procurement personnel spent at least four days a week touring existing and potential suppliers. With the arrival of computers, mobile phones and E-mail, we relaxed and practise procurement from our desktop. This works well if we procure from companies that are formalised. Our counterpart equally sits in the office, writes E-mails and often has an automated software that supports order and delivery. That works fine when one company that is formally organised buys from another company that is formally organised. Procurement from local markets often means buying from small producers. But, are they formally organised? Are they like us?
Let’s visit the characteristics of an entrepreneur. Small firms are mostly owner-managed. Their success depends on the owner’s commitment, push for innovation and performance, and her ability to lead a team of workers. A day in the life of an entrepreneur is full of various tasks. Sometimes the delivery-van breaks down and you need to get spare parts and a mechanic. Every day you must open the workshop or offices and instruct your team what to do. When customers inquire it’s the entrepreneur who deals with them. When tax payments are due its’s the owner of the business who discusses with the accountant what to do. You get a sense how their day looks like? It’s often a juggling of many responsibilities. And, it is exactly that ability, that commitment and that endurance that makes the small firm successful. Bill Gates and Richard Branson aren’t very different, only that they have a better support system at their hands.
Small firms are not formally organised, and that is where we clash with our formal approach to local procurement. Our economy needs small firms, they make the economy more resilient, contribute significantly to job creation, and are the drivers of innovation. ‘Zoona’ for example came out third among the ‘Top Ten Most Innovative Companies in Africa 2018’. As much as 80% Zambia’s private sector comprises of small firms, they employ over 70% of the country’s workforce (The World Bank). We must recognise their uniqueness and appreciate the way they work.
We can make it work. Commitment to local markets and the right approach by our procurement team can lead to a win-win situation for buyer and supplier. Let’s be clear, it’s neither about lowering standards nor is it a social project. We want results, we want business and we want rising quality.
We must stop our usual supply-side centred approach, demanding that owner-managed companies work like us. This approach hosts the risk that it creates a divide between informal small firm economy and corporate bureaucratic culture. And moreover, it ignores the entrepreneurial way of doing business.
Good procurement practice
- knows, understands and monitors each supplier;
- has at least two suppliers for every product; and
- has tacit agreements with suppliers.