Lack of formal procurement practices

Lack of formal procurement practice is causing growing pains for UK mid-sized businesses

Research shows that procurement is not keeping pace with businesses’ plans for expansion

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

The independent research (with 200 senior managers from UK businesses with a £50m to £250m turnover) into their business growing pains shows that 83% of respondents think that their supplier base could not support their business’s future growth plans, while only 34% of organisations have a dedicated procurement function for managing purchasing.

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.

When it comes to procurement, a massive 84% claim that as their businesses have scaled organically, they’ve simply outgrown their ‘home grown’ processes. In addition 75% claim 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.

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

Paul Ellis, managing director, Wax Digital said, “It’s clear that these mid-market organisations have real aspirations for growth, 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.

“Our survey respondents all seem to have some form of procurement control in place, but roughly only a third have 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’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 optimise so 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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