Lack of procurement processes 'holding back firms'

24 May 2017

A lack of formal procurement practices is holding back UK midmarket businesses from growth.

Research by Wax Digital, which involved canvassing 200 senior managers from firms with turnover between £50m and £250m, found only 34% of organisations had a dedicated procurement function and 83% believed their supplier base could not support their business’s future growth plans.

Eight in 10 respondents did not consider themselves to be driving an innovation culture within the supply chain, while 83% confessed to not challenging suppliers adequately on cost and performance.

Many survey replies indicated that respondents believed their company’s procurement function had failed to match the organisation’s growth. Some 84% claimed that as their businesses have scaled organically they had outgrown “homegrown” processes.

Three quarters did not consider their technology sufficiently enabled for a business of their size, while 37% considered themselves to be held back by manual ordering and payment processes.

Half of respondents struggled with getting a better grip on costs and 44% said the same about managing suppliers more effectively.

The cost of invoice processing, ensuring purchase orders are issued and making sure valid contracts in place with key suppliers were rated as challenges by 42%, 41% and 36% of respondents respectively.

Paul Ellis, managing director at 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.”

He said while all respondents seemed to have some form of procurement control in place, only a third had a dedicated procurement function for both managing purchasing and dealing with supplier sourcing.

Finance or other departments are 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,” Ellis added.

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