SMEs are starting to recognise how procurement can benefit them by reducing costs, controlling spend and maximising labour efficiency, according to research.
The research by e-procurement provider Wax Digital surveyed 260 senior managers working for UK businesses with a turnover of £50m to £250m on when they thought procurement should be introduced into organisations.
The survey revealed most organisations (77%) needed procurement by the time they had 100 supplier contracts. Three-quarters (75%) said procurement was needed once a company had reached a turnover of £50m, and 72% believed procurement was necessary once 500 invoices per month were being processed.
Rising costs were the most common reason (65%) for first introducing procurement, followed by 45% citing inefficient and labour intensive processes and 30% increasing business risk as the reason they decided to implement procurement.
Only 31% of those surveyed said that procurement had been introduced as a proactive measure, compared to 48% who said they implemented it as a reactionary measure to a negative situation.
Paul Ellis, managing director of Wax Digital, said the results demonstrated that many businesses had not yet recognised the “tipping point” at which they should introduce procurement.
“No two businesses are the same and each will have its own procurement tipping point,” he said.
“The research shows that UK businesses are realising that formal procurement isn’t just for large organisations and that any business that wants to control spend, improve its supplier performance and eradicate slow admin-heavy processes from the business can benefit from the adoption of a more professional approach to procurement.”
However, the 82% respondents who revealed they had experience of introducing procurement into their firms for the first time cited a number of barriers to adopting formal purchasing processes.
Gaining senior management buy-in was the most cited obstacle (35%), with managing cultural changes (21%) and lack of internal knowledge (19%) following.
Ellis said: “In spite of the barriers to adoption experienced by some of our research respondents, none of these challenges are insurmountable and forward thinking organisations will recognise their tipping points and put in place the necessary procedures to prevent a negative situation happening in the first place.”