Saturday, 27 June 2015

(False) economies of scale


A long time ago, in a career path far far away, I was responsible in part for a fairly large IT project involving a number of different educational institutions. We were dealing with national and international companies such as Apple and Microsoft and it was here that I came across the vagaries of procurement policies and the problem of economies of scale. 

Because of the regulations surrounding procurement and in efforts to be transparent, the big suppliers had to tender for work, and the same products were put in place across the board in the spirit of economy. The problem came when you tried to put any form of creativity or spontaneity in to play. For example, at one point we began to focus on the use of Film as a teaching and learning tool. To get the film from the cameras onto the computer to work with it we needed to install dedicated graphics cards. You could buy what we needed for £20 at the time, but because there was a list of suppliers and products from which we couldn't deviate, the one we had to buy was ten times that price. 

The same thing is happening in catering: suppliers have to tender for contracts, squeezing out smaller companies even if their products are better or cheaper or both. Recently I was phoned by a small family company who'd been one of our suppliers for years. They'd been part of a consortium of suppliers for years, but because of their size, they are not able to compete with other bigger players in the consortium. The people who hold the purse strings had decided that it would be more cost effective to use a standardised product from one the more wide ranging suppliers. As a result, our smaller local firm had simply lost huge amounts of business in one fell swoop. For the same reason we have to buy products from countries such as Morocco and Kenya, when the same thing is growing 300 yards away. Small independent local businesses need to be nurtured and supported. What hope is there as long as the companies that can use them simply won't?