Scotland business

Scottish firms 'relying on too few suppliers and customers'

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Scottish businesses lose more than £650m each year by relying too much on a small number of suppliers and customers, according to a study.

KPMG Enterprise said the practice left companies exposed to price increases, quality control issues and bad debt.

More than a third (38%) of companies reported that they had experienced a problem in their supply chain in the last year.

And 41% of companies expressed concerns over their reliance on a few suppliers.

Half of respondents said the threat of losing large customers was their "most pressing day-to-day concern".

About 220 UK firms with a turnover of more than £10m took part in the study.

'Common vulnerability'

Phil Charles, head of KPMG Enterprise in Scotland, said: "Our research suggests that in their pursuit for growth, these leaders are leaving the back door open by failing to adequately address the many and varied risks that threaten their business.

"Whether related to customers, suppliers, data security or regulation, never has the adage 'fail to prepare, prepare to fail' rung more true - and the financial impact that this lack of preparation is having on business is startling.

He added: "Relying on a small pool of suppliers is a particularly common vulnerability amongst middle market companies, yet we've seen many high-profile examples of organisations that have taken a substantial financial hit as a result of a fracture in their supply chain.

"And these fractures aren't solely caused by suppliers going bust.

"Ethical lapses such as poor working conditions, data security breaches, substandard production, a flouting of environmental regulations or irregular financial transactions can all translate into significant reputational - and ultimately financial - damage to the contracting business."

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