My research shows that less than 15 per cent of SMEs have any procurement expertise. So is there an opportunity to help them with this?
With 4.8 million SMEs in the UK with combined revenues of £3.1 billion, there’s an awful lot of potential uncontrolled spend that procurement have yet to tap into.
So why do SMEs concentrate on the next sale and invest up to 10 per cent of their revenue on developing new business, versus nothing on managing and reducing their operating costs? Is it really that they cannot justify the headcount cost, or is there more to it?
Other than large companies having deeper pockets to invest in procurement support, the operating expense buckets are similar – it’s just a bigger bucket if you are a £1 billion corporate compared with a £2 million start up.
So at what point does procurement justify itself and what is the measure of return on investment?
As we know, the lines of procurement have blurred over the years, our procurement functions now get under the bonnet of company spend, mitigate contractual/commercial risk, and manage orders and invoice validation, all at the same time.
Even in an SME, our breadth of expertise is beyond the realms of the most seasoned finance directors’ abilities. Add this to their demanding 12-hour day, do they really have the time to focus on proactively reducing their costs? Is the case for procurement support justified?
Winning new business in an economic downturn is increasingly more difficult so surely now is the time to curb SME spending? As we procurement experts know, with a little investment in the right resource we can easily save more than 10 per cent on a company’s controllable spend. What finance director would turn down such a savings opportunity?
☛ Phil Machin is director at Bridge Procurement and previously held senior procurement roles at Burberry and COLT Telecommunications