There’s no shortage of discussion around the importance of working with small and medium-sized enterprises (SMEs). Governments have set procurement targets, large corporations make commitments to diversify their supply chains and many procurement leaders genuinely want to foster more equitable access to opportunity. But too often, those good intentions don’t result in meaningful change.

If your organisation is serious about supplier diversity, you need more than policy statements. You need processes, technology and supplier relationship management (SRM) strategies that make it easier, not harder, for SMEs to do business with you.

Let’s explore the business case for SME inclusion, the common pitfalls that prevent progress and the practical steps you can take to actively bring SMEs into your supplier base – backed by the right SRM software to make it scalable and sustainable.

Why SMEs Matter in Modern Procurement

In the UK alone, SMEs account for over 99% of all businesses and around 60% of employment. They are vital to economic growth, job creation and innovation. Working with SMEs can give you a strategic advantage. Here’s why:

1. Innovation and Agility

SMEs often punch above their weight when it comes to innovation. With flatter hierarchies and less bureaucracy, they can pivot quickly, try new things and respond rapidly to customer needs.

2. Economic Resilience

Supporting SMEs means supporting local economies and broader economic resilience. Diverse supplier ecosystems are more robust in times of disruption, as we saw during the COVID-19 pandemic.

3. Social Value and ESG Goals

Public sector organisations in the UK are now required to consider social value in procurement and private companies are increasingly evaluated on environmental, social and governance (ESG) performance. Partnering with SMEs can help you deliver measurable positive social impact.

4. Better Service and Niche Expertise

SMEs often offer a more personalised service, niche specialisms and a commitment to quality that can be difficult to match in larger suppliers.

So why isn’t everyone doing it already?

The Barriers Facing SMEs in Procurement

Despite the strategic advantages, SMEs still face significant barriers when trying to work with large organisations. Many of these challenges stem from clunky systems and supplier management processes that are inadvertently designed for big business.

Here are some of the most common issues:

1. Overly Complex Onboarding

Lengthy prequalification questionnaires, manual compliance checks and inconsistent onboarding processes are a major deterrent for smaller suppliers. They simply don’t have the admin bandwidth to navigate it all.

2. Slow or Unfair Payment Terms

Late payments and extended payment cycles hit SMEs harder than anyone. If your supplier portal doesn’t provide clarity and transparency around payment status, you risk damaging the relationship from day one.

3. Opaque Selection Criteria

Without clear insight into what procurement teams are looking for, SMEs often feel like they’re locked out of tenders or informal sourcing decisions dominated by incumbent suppliers.

4. Lack of Feedback

When SMEs lose out on opportunities, they’re rarely given constructive feedback. This makes it difficult to improve and try again, leading to disillusionment and disengagement.

5. Disjointed SRM Practices

Even when SMEs make it into your supplier base, they can be forgotten without proper supplier relationship management practices in place. They may not get the same attention or support as larger suppliers, despite often needing it more.

These are not insurmountable problems. But solving them requires an intentional approach and the right tools.

Embedding SME Inclusion Into Supplier Relationship Management

If you want to genuinely increase SME participation in your supply chain, you can’t just bolt it on as an afterthought. It needs to be woven into your end-to-end supplier relationship management (SRM) approach.

Here’s how you can do that, step by step:

1. Redesign Supplier Onboarding With SMEs in Mind

A clunky onboarding process is one of the first points of friction. SRM software (and eSourcing Solutions) can automate, simplify and standardise this experience for all suppliers – without sacrificing compliance or due diligence.

Look for SRM solutions that enable:

  • Configurable onboarding workflows for different supplier types
  • Tiered or risk-based onboarding to reduce burden on low-risk SMEs
  • Easy-to-use self-service portals with clear guidance and real-time support
  • Document upload and validation tools to streamline admin

By removing the administrative drag, you make it easier for SMEs to start working with you – and improve the user experience for all suppliers in the process.

2. Give Visibility Into Opportunities

One of the key frustrations for SMEs is simply not knowing when work is available. Unless they’re already in your network, they may never hear about opportunities.

Your eSourcing and contract management tools should support:

  • Transparent pre-market engagement
  • Supplier discovery features to uncover new SME suppliers
  • Dynamic sourcing events with clear eligibility criteria
  • Open, fair routes to tender – even for smaller or non-traditional suppliers

This is where a fully integrated source-to-contract platform can add real value, bringing visibility, access and fairness into your sourcing strategy.

3. Track and Report on SME Engagement

What gets measured gets managed. To make real progress, you need accurate data on how many SMEs you’re engaging, awarding work to and actively managing as part of your supplier base.

Leading SRM software includes dashboards and reporting tools to:

  • Tag and categorise suppliers by type (e.g., SME, minority-owned, local)
  • Track sourcing outcomes and spend by supplier size
  • Monitor KPIs like time-to-onboard, payment times and performance
  • Benchmark SME engagement across departments or categories

Armed with the right data, you can spot gaps, celebrate wins and hold your team accountable.

4. Support Two-Way Communication

Strong supplier relationships are built on trust, not transactions. SMEs often feel like they’re shouting into the void once the contract is signed.

Use your SRM tools to create:

  • Centralised communications hubs for supplier updates, queries and feedback
  • Regular review cycles and performance check-ins
  • Feedback loops after sourcing events – even for unsuccessful bids

5. Build Stronger, More Transparent Relationships

Including SMEs isn’t just about winning the contract – it’s about building relationships that last. Good SRM software enables:

  • 360-degree supplier profiles with history, certifications, performance data and notes
  • Structured feedback loops with suppliers post-project or contract
  • Risk dashboards that help you monitor exposure without overburdening low-risk suppliers
  • Automated reminders for key dates like contract renewals, policy updates, or performance reviews

Relationship management doesn’t need to be resource-intensive – it just needs to be smart. With automation and transparency, you can deliver meaningful engagement at scale.

Why SME Inclusion Matters in UK Public Sector Procurement

In the UK public sector, the case for SME inclusion is enshrined in policy and national economic strategy. With public sector organisations spending hundreds of billions annually on goods and services, the government recognises the huge opportunity this represents for supporting British SMEs – and the broader economy.

A National Target with Local Impact

The UK Government has committed to spending at least £1 in every £3 with SMEs, directly or through the supply chain. This ambition isn’t just about spreading opportunity more fairly – it’s rooted in the understanding that SMEs are the lifeblood of local economies. By procuring from SMEs, public bodies can:

  • Drive regional economic growth and regeneration
  • Create local jobs and skills opportunities
  • Stimulate innovation by backing emerging enterprises
  • Improve social value outcomes, especially in underrepresented communities

This aligns with wider policy goals, including levelling up, carbon reduction through local sourcing and supplier diversity.

The Compliance Challenge

Despite these ambitions, many public sector organisations struggle to meet SME targets. Why? Because legacy processes and fragmented systems make it difficult to:

  • Accurately track SME involvement across direct and indirect spend
  • Advertise opportunities in a way that is accessible and transparent to smaller providers
  • Onboard and manage SME suppliers without overwhelming them with bureaucracy
  • Measure social value delivered through SME engagements

The result is a persistent gap between policy and practice, with many smaller suppliers still shut out of public contracts due to complexity, opacity or resource barriers.

Where Technology Can Help

This is where source-to-contract software becomes a key enabler. With the right digital tools, public sector procurement teams can:

  • Simplify onboarding and qualification for SMEs
  • Open up visibility of tenders and opportunities in a central, searchable platform
  • Apply proportionate risk controls to reduce unnecessary admin burden
  • Track and report on SME engagement and social value delivery
  • Support strategic supplier relationship management (SRM) that treats SMEs as valued partners, not transactional vendors

Ultimately, digital procurement isn’t just about efficiency – it’s about inclusion, transparency, and accountability. For public bodies under increasing pressure to demonstrate best value and equitable supply chain practices, inclusive SRM and S2C solutions offer a clear path forward.

Final Thoughts: Turning Inclusion into Impact

Incorporating SMEs into your supplier base is a strategic move that fosters innovation, agility and resilience within your supply chain. However, realising this potential requires more than intent; it demands actionable strategies underpinned by robust technology.

Modern source-to-contract (S2C) and supplier relationship management (SRM) software solutions are pivotal in this transformation. These tools enable procurement teams to build transparent, supportive relationships, ensuring that SMEs are not just included but are integral, thriving partners in the supply chain.

Embracing such technology signifies a commitment to a more inclusive, dynamic and resilient procurement strategy. It’s about moving beyond words to tangible actions that reflect your organisation’s values and strategic objectives.