Autumn budget presents both supply chain opportunities and risks for SMEs

10 Nov 2018
Article by Achilles

As part of its 2018 autumn budget, the UK Government has announced a 30% increase in spending on infrastructure projects and a £30bn package for England’s roads. While great news for SME suppliers, it is critical that supplier performance is rigorously benchmarked and scrutinised before the newly available funds are allocated. Chancellor, Phillip Hammond also signalled the end of controversial PFI and PF2 funding models for infrastructure development. The change is unlikely to end the involvement of private companies in the delivery of essential public services and infrastructure, but it does indicate that any contracts awarded will also be subjected to increased scrutiny.

SMEs have long been recognised as the engines of growth in the UK and beyond, and the Chancellor’s 2018 budget underscored their importance to the national economy.[1] But with SME suppliers looking to expand into those areas boosted by investment, contractors will face a widening pool of capabilities that will make selection a challenging process. Competition will be fierce for new contracts, and demonstrable experience, capability and compliance throughout the supply chain will be more important than ever.

 

Supply chain risk and reputational damage

At Achilles, we know that the lure of lucrative contracts can lead suppliers to push their credentials hard, sometimes without having the track-record, systems or skills to justify their claims. Lack of transparency or oversight can lead to significant cost and disruption within established supply chains. For example, according to our statistics in the UK construction industry, 87% of suppliers conduct internal audits, but only 53% audit their own suppliers. These gaps can leave buyers and suppliers alike exposed to risk and reputational damage.

We work hard to help SMEs improve and benchmark their performance, thereby providing tangible evidence for selection during project tenders. Through rigorous supplier audits, for example, we help to reduce risk and, in turn, enhance prospects. Indeed, companies we audit are 40% less likely to have an accident versus the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR) average, which is a major consideration for procurement professionals. A consideration which may be the deciding factor in contract allocation.

 

Data-driven insights

In addition to supporting suppliers, we also make our data readily available to buyers, enabling informed decisions to be made when awarding projects and funds. Our intelligent, data-driven insights help contractors to identify and manage supply chain risks that could affect profitability and reputation. Each year, for instance, we save the UK utilities industry £30m in supplier qualification costs alone.

The transparency provided by this type of data can also give investors confidence in the long-term viability of projects. In fact, one of eight key recommendations from a report by the Institute of Civil Engineers suggests that providing additional analysis and detail around the risk and viability of each project could serve to support the investor community and help establish sustainable finance models in the future. By helping to enhance supplier performance and qualifications, and by equipping buyers with unique data and insight, we aim to support all the players, big and small, up and down the supply chain. And while we welcome the Chancellor’s recently announced infrastructure investment packages, we urge that the necessary procurement checks and balances are observed. Only this way can the Government ensure that the associated risks and costs are minimised, and that maximum value is derived for UK Plc.

 

 

[1] For example, the new digital services tax will only apply to businesses with global revenues exceeding £500 million


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