Supply chain opportunities for Scotland and policy development evidence

Scottish Enterprise’s Insights & Economics Team was asked to explore the extent of activity SMEs have in the supply chains of large businesses, and what could be done to strengthen their ability to benefit from the opportunities presented by global supply chains.

A series of discussions with colleagues from across Scottish Enterprise, and with individuals in Invest Northern Ireland, and the Department for Business, Energy, and Industrial Strategy (BEIS) were conducted. Data was explored where necessary, and previous evidence was referenced where it added insights to the evidence from discussion.

There are many barriers for SME entry into global supply chains, which are difficult to navigate from an entry and supporting entry perspective. One of the most recent trends in supply chains has been a desire from larger businesses to outsource the management of the supply chain to Tier 1, medium-sized businesses. This offers significant potential to embed supply chains locally. However, Scotland has a long-standing challenge in creating growth into the medium-sized business bracket, which may mean opportunities go elsewhere. For example, there are fewer 50-249 employee manufacturing businesses in 2022 than in 2010. The biggest growth in number was in 0 employee and 1-4 employee businesses. This trend highlights the ‘missing middle’. To deliver success which includes supply chain readiness, the evidence suggests the goal for economic development agencies should be to become/remain a trusted, credible, and independent intermediary, to reduce risk barriers and perceptions, and enable both the large(r) and SME businesses to achieve beneficial economic objectives. There are three components to this: 1. With the demand side, most often global businesses, the focus needs to be on opportunity development – anchoring high-value activity and securing spillover benefits for the wider economy. This needs to be rooted in strong relationships. 2. Secondly, the global relationships need to compliment, and be deployed where necessary, alongside the ongoing activities of those working with SMEs to raise their capabilities, encouraging business development, via investing, innovating, and being international – creating more medium-sized businesses willing, capable, and able to take advantage of growth opportunities, including through supply chains. 3. The critical element – the ‘glue’ that binds this together to be effective is in-depth, industry and sector knowledge amongst advisors/those supporting businesses. This adds independent expertise which gives credibility.

There are no recommendations made.