Lack of Formal Procurement Practice Hindering Mid-Business Growth

We are delighted to feature this post from Paul Ellis, managing director at eProcurement and spend management provider Wax Digital. 

The UK’s mid-market businesses are being held back from their growth ambitions due to a lack of formal procurement practices. Processes such as sourcing new suppliers to expand supply chains are being hindered by slow or manual methods meaning that businesses are struggling to meet their plans for growth.

That’s the finding from a new piece of independent research we recently conducted into the business growing pains of 200 senior managers from UK businesses with a £50m to £250m turnover.

The survey, conducted by independent market research consultancy, Sapio Research, showed that 83% of respondents think that their supply base could not support their business’s future growth plans. Other supplier management issues are also being blamed for thwarting many organisation’s expansion plans, with 79% claiming that they are not driving an innovation culture within the supply chain. Also, 83% said they don’t really challenge their suppliers adequately on cost and performance.

Purchasing processes were also flagged in the survey, with many respondents claiming their own procedures were no longer able to support business growth. Although all the respondents seem to have some form of procurement control in place, only a third has a dedicated procurement function for both managing purchasing and dealing with supplier sourcing - with finance or other departments more likely to be controlling these practices.

It also revealed that a massive 84% of senior business managers whose organisations have scaled organically have simply outgrown their ‘home grown’ procurement processes. In addition, three-quarters (75%) claimed that their technology is not sufficiently enabled for a business of their size, while at 37%, over a third are held back by manual ordering and payment processes. And, only 34% of organisations have a dedicated procurement function for managing purchasing.

Other procurement challenges that the UK’s mid-market appear to be struggling with include: getting a better grip on costs and spend (49%); managing suppliers more effectively (44%); the cost of invoice processing (42%); ensuring POs are issued (41%) and making sure valid contracts are in place with key suppliers (36%).

What’s clear is that these mid-market organisations have real aspirations for expansion, as 92% have strategies which go beyond ‘organic’ growth. However, many are being held back by the limitations of their supply chains and procurement’s lack of formal processes. It’s time for businesses to see the bigger picture and that without the tools to automate and optimise many of the responsibilities that fall to procurement, they will remain unable to scale to meet the demands of the business.

Three-quarters of respondents are yet to embrace the technology they need to automate many important procurement functions. This represents a great opportunity for those businesses to drive much greater value within their organisations by utilising procurement tools that are now available and get the right foundations in place to support business growth and procurement.

 

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