Tag Archives: small medium sized companies

The Procurement Tipping Point

At what point should a growing business bite the bullet and professionalise procurement? New research from Wax Digital has found that the right time is surprisingly early in a businesses’ growth, but it’s usually done on the back foot. 

As professionals in the sector we tend to think that procurement is the sole domain of large organisations spending millions of pounds on thousands of suppliers. However, new research has found that many smaller and more formative businesses also turn to procurement.

We recently surveyed 260 UK business and procurement experts and asked them at what point organisations needed to professionalise procurement to get a firmer grip on spend, suppliers, sourcing and so on. We were surprised by how many thought the ‘tipping point’ for procurement was relatively early on in a business’ growth. The results were as follows:

  • 75% said procurement was required once a company reaches £50M turnover
  • 77% claimed to need procurement by the time a business has 100 supplier contracts
  • 72% said once 500 invoices per month are being processed, procurement was essential.

Clearly, it seems that many smaller organisations are adopting procurement, so why is this? When asked why they introduced procurement, 68% said that it was due to rising costs, while 45% said that it was due to inefficient and labour intensive processes. Being a successful, up-and-coming business means experiencing rapid growth and significant change in these areas – more so than a larger, more established business.

For example, an organisation may be undergoing a merger or be highly acquisitive, bringing in more complex supplier portfolios or increasing spend overnight. These types of events can force a business to rethink processes like procurement. The very foundations of the organisation could adjust dramatically, and existing resources may simply not be adequate enough to support it.

Quick, someone build us a procurement function

Another interesting discovery in our research was that procurement is often introduced ‘on the back foot’ as opposed to being part of a pre-planned vision. We found that procurement is implemented as a reaction to a negative situation 48% of the time, compared to 31% of the time when it’s rolled out as a proactive and positive step forward. So few businesses planning ahead with procurement suggests that it’s (wrongly) an afterthought for many. Many businesses are ‘reactively’ using procurement, suggesting that they are already experiencing issues such as a lack of spend control or inefficient processes. But pre-planning with procurement could help businesses evolve more efficiently to try and reduce these problems.

That said, rolling out procurement isn’t always plain sailing, and smaller businesses with limited resources may particularly struggle to establish this new function successfully. Gaining senior management buy-in is the most common barrier to adopting formal purchasing processes, cited by 35%. Managing cultural change and a lack of internal knowledge followed, scoring 27% and 19% respectively. Given that they work for a smaller business – perhaps with a less rigid structure – the need for a procurement function might simply not occur to some SME employees, and it may take some time to win the support of colleagues. Those in the business being hindered by the lack of procurement shouldn’t be afraid to make a case for it to senior management.

Make sure the time is right

No two businesses are the same and each will feel the need for procurement at different stages. It’s not right to see procurement as something that should only be introduced when you reach a specific size or stage in the business cycle. Instead, consider when the businesses is feeling a strain that formalised procurement could help with.

It’s time for the procurement community to help strip its perception as a function for the larger business. This way more businesses can realise its effects.

Contributed by Paul Ellis, Managing Director at Wax Digital.

Procurement Is Everywhere But It Wears Hundreds Of Disguises

When procurement wears a mask, layers of stage make-up or one of its other many disguises, you might find it tricky to identify. But, as Daniel Ball explains, procurement is everywhere and in all of our organisations- it might just be presenting itself in a different way…

It’s fair to say that, as a concept, procurement tends to be associated with large businesses.

However, any organisation from the smallest to the largest buys things that they need from chosen suppliers. And, however small the organisation, they face much of the same procurement challenges that we all do. So why do we not consider them all to be ‘in procurement’?

The many disguises of procurement

In reality, the entry point starts when a business begins and evolves in sophistication and complexity with their growth. Although we think of procurement in terms of an established function, role or set of rules, much of the practical procurement going on out there is actually in a formative or evolutionary stage, depending on the maturity and needs of the organisation in question.

This is a vital insight for those of us working to support the procurement profession. We have to remember that we’re not dealing with a perfect procurement-badged world, nor one which conforms to all of the industry buzzwords and ‘best practices’.

In most cases, we’re dealing with people in a state of flux, who might well not call themselves procurement professionals; after all, there are hundreds of different guises in which procurement presents itself. This is particularly prevalent in high growth mid-sized businesses who are feeling the pain of change or ‘growing up’ more severely than most.

What challenges do mid-sized companies face?

Wax Digital wanted to find out what kind of challenges mid-sized companies are faced with during expansion.  We asked 200 senior business management and procurement professionals at fast-growth, mid-sized UK businesses about the pain points they have experienced as their organisation has grown.

Without giving too much away, here are 3 of the key highlights our research uncovered; demonstrating the kinds of procurement-related issues hampering their ability to support business growth.

  1. 83 per cent of respondents surveyed said they didn’t challenge their suppliers on cost or performance adequately, whilst 78 per cent struggled to control spend, citing departmental purchasing autonomy as a problem. Three quarters also said that they don’t have sufficient purchasing technology or systems in place to keep up with the pace of growth.
  2. UK mid-sized businesses have a broad range of growth challenges that are all linked back to both upstream and downstream procurement needs. Even though they’re not yet talking procurement these businesses are dealing with procurement’s problems and need a solution.
  3. In fact, mid-sized businesses are perhaps the segment of the UK economy most in need of professional procurement practice. Their reasons for, and rate of, change are so extreme they must get their house in order before it becomes too unwieldy and difficult to control.

The results of the research will be revealed in full next week via Wax Digital’s website.

What are your media consumption habits?

Wax Digital are conducting a quick survey to understand more about how procurement professionals use media for work. If you’ve got a few minutes spare to tell us how you stay on top of latest industry news and trends, we’d love to hear from you!  It’s just a few simple questions on your media consumption habits. And, to say thanks, we’ll put your name into a draw to win a £200 donation to a charity of your choice.  Complete the survey here.

How South Africa is Building Engagement with Small Business

A thriving small business community is a sign of a prosperous economy. In South Africa, a new network has been launched to help build engagement with these enterprises.

Small Business

Procurement on-line portals that efficiently link prospective buyers with qualified small enterprises are the next big thing.

Technology is now available that allows us to quickly and smartly facilitate business transactions for mutual benefit, why are we not doing more to support Small, Medium and Micro Enterprises (SMMEs)? Central and local government departments spend billions; some of this procurement expenditure can be channelled in to the development of the SMME sector.

Some ‘portals’ exist primarily to deliver advice and guidance, that’s useful but it’s not enough.

Why is developing SMMEs important?

A thriving and growing small business community is a sign of a healthy economy. One main objective across Africa is to stimulate economic growth and create jobs; this is one way to do it.

Public sector bodies in South Africa have been urged to ensure their purchasing strategies “explicitly recognise the significant benefits of procuring from local small businesses”. The Minister in charge of small business development said that small businesses have been “historically shut out as a result of bureaucratic and costly procurement practices which favoured big suppliers”.

Developing the SMME sector solves many challenges for governments and for companies that have diversity or enterprise development targets.

South Africa’s initiative

South Africa has a fully functioning SMME solution that has now been in operation for five years. The Supply Chain Network (SCN) came about by necessity. Organisations are required by government to assist in creating jobs for the lesser skilled and unemployed sectors of the population. This portal is made affordable by the support of big businesses and especially by one of the major banks.

It works for the seller by…

  • Providing a profile page with all key information about the seller
  • Showing the seller’s credentials, certifications and trade references
  • Providing a platform for advertising goods and services using an e-catalogue with images

SCN provides a verification service that allows the approved seller to get a priority listing in search results.  Sellers with a high profile score have a better chance of attracting bigger and better clients.

A great feature is easy access to tenders. Available tenders are interrogated using a powerful search facility which all allows for setting up alerts using key words. Tenders can be accessed in summary form or in full detail, saving time and effort for the seller.  

Better still, it works for the buyer…

  • SCN manages vendor certification renewals so that all credentials are current, including Tax Clearance and Company Registration
  • Buyers can use verified information to update their master vendor files
  • Due diligence is simplified, as buyers can rely on the integrity of the profile information
  • The search function uses standard industry terminology (UNSPSC) and smart filters

The SCN system also provides an eRFQ facility with built-in rules. Suppliers can upload all their attachments electronically as part of the response. It is an on-line paperless solution that includes automatic notification to suppliers of any changes, updates, withdrawal, regrets and awards. Particularly useful is the full audit trail on all sourcing activity.

Supply Chain Network in South Africa is a low-cost solution that aims to promote the objectives of growing a healthy small business community. Why can’t it work in other emerging markets?

You can find out all you need to know about the Supply Chain Network on its website.