With focus in the U.K. on small businesses as they struggle to survive late payments and restricted access to capital, the mid-market is facing its own challenges for growth.
One of those hurdles, according to researchers at eProcurement software firm Wax Digital, is a lack of a digital procurement strategy, impacting the mid-market’s ability to effectively and strategically source suppliers and expand their supply chains.
A new report from Wax Digital found that 83 percent of mid-market survey respondents aren’t confident in their supplier base’s ability to support future growth plans. That’s based on a survey of 200 senior managers at companies with between $65 million and $325 million in annual turnover. Only about a third of these professionals said they even have their own procurement function dedicated to purchasing procedures.
“It’s clear that these mid-market organizations have real aspirations for growth, as 92 percent have strategies which go beyond ‘organic’ growth,” said Wax Digital Managing Director Paul Ellis in a statement. “However, many are being held back by the limitations of their supply chains and procurement’s lack of formal processes.”
Suppliers seem to be a critical area in need of improvement, according to the report.
Researchers found 79 percent of executives said suppliers aren’t driving innovation across their supply chains, while 83 percent admitted they don’t challenge their suppliers enough when it comes to cost and performance.
Other concerning data points suggest mid-market firms aren’t able to grow because of their lackluster procurement strategies.
Nearly half (49 percent) said they are struggling with getting a better grip on costs and spend, with 44 percent reporting struggling to manage suppliers effectively. Forty-two percent said the cost of invoice processing is a hurdle, while nearly the same amount said ensuring POs are issued is a challenge, too. More than a third struggle to make sure valid supplier contracts are in place.
While mid-market firms want to grow, most say they are facing massive headwinds in this regard.
The majority (84 percent) told Wax Digital that they have already outgrown their “homegrown” processes, and three-quarters said the automation technologies that they have in place are insufficient for the new-found size of their companies. More than a third say they are held back by manual ordering and payment processes.
While the data signals struggles for the mid-market to grow, it could be a sign of optimism, considering U.K. mid-market firms had previously put growth plans on hold following news of the Brexit vote. Separate research from Hitachi calculated $81.5 billion in investments were no longer pursued by businesses in the U.K., with a third saying their decision to step away from these investments is a direct result of Brexit. Now, Wax Digital’s research suggests, the mid-market does indeed want to grow, but a weak procurement strategy may be holding them back.
“Our survey respondents all seem to have some form of procurement control in place,” said Ellis, “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.”
Continuing his reflection of the survey results, Ellis noted that the mid-market has to recognize the strategic value of procurement, something industry players have been similarly pushing for the small- and large-enterprise market as well.
“It’s time for businesses to see the bigger picture and that without the tools to automate and optimize 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 [automation] technology they need to optimize so many important procurement functions,” the executive continued. “This represents a great opportunity for those businesses to drive much greater value within their organizations by utilizing procurement tools that are now available and get the right foundations in place to support business growth and procurement.”