Saving Private SME

By 17 November 2012December 17th, 2018No Comments

I was lucky enough to attend part of a seminar organised by Pacte PME in the very elegant Société Générale Tower last October.

The Pacte PME (SME Pact) is a fine initiative indeed. Log onto their site to find out more (in French only). For those who do not know, this association has set itself the goal of growing SMEs by leveraging a proactive and concerted policy involving major contractors.

The goal is not economic philanthropy: all buyers know that it is often in their best interest to help suppliers develop so they can fulfil their purchasing strategy.
And quite naturally the SME that any major contractor wants to help grow will be a significant source of innovation from which it will derive considerable benefit. It is no surprise therefore that the Pacte PME is initially focusing on “SMEs with a differentiating offering and growth potential”.

And the others?

What aid or attention should a local cleaning services SME or small public works company receive? And what about mould and tooling manufacturers? They are not “innovative” companies in the usual sense of the term, but they are at the heart of our economy.

The strengths of service companies are first and foremost their local presence and service quality – the threat from service providers in low labour cost countries is very limited. So the competition plays out among service providers on the same playing field.

For small industrial companies for which there is no possibility of any real technological innovation, the situation is totally different. Thrown in at the deep end of globalisation, their only means of survival is a cost advantage: the battle is all too often stacked against them with competitors from low labour cost countries. All that is left for them is to deliver a quality advantage while still remaining cost competitive. For all sorts of reasons, France has never managed to develop this profile of company and the French SME industrial fabric has worn through in many places. In some sectors, it is now in shreds. A purchasing manager in a large industrial group recently told me that he was unable to find a mould maker in France. He also noted that Spanish suppliers were once again competitive because of the country’s lower labour costs driven down by the economic crisis.

Should we draw a line through this category of SMEs that have survived for decades through the solid application of their expertise, even if the innovation content is relatively low?

That’s where things get complicated, because the question involves all sorts of areas. Pell-mell:
• A country’s economic strategy
• Labour policy
• A company’s sustainable development and eco-system
• The responsibility of Purchasing Divisions.

Yes! Purchasing Directors are not without some responsibility here. Just ask the question: By setting buyers sourcing targets in low labour cost countries haven’t the leading contractors sped up this process of industrial desertification?

Can a contractor remain competitive through its purchasing policy while protecting the lifeblood of a set of “traditional” local SME suppliers even though they are overall more expensive than their Chinese counterparts?

I would be interested in hearing your thoughts.

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