UK business suffering from a culture of spending apathy
~ Industry report finds clear supply chain failings within UK business which hamper organisational effectiveness, damage competitiveness and restrict growth ~
April 25 2013: A report commissioned by ERA, the specialist procurement consultancy, shows many companies are suffering from a culture of spending apathy caused by employees failing to control purchasing, review suppliers or challenge the status quo unless there is an issue. The second report of the ERA ‘Smarter Spending for Business’ campaign calls on UK businesses to adjust internal purchasing attitudes to aid their chances of success or survival in 2013.
Doing business in Britain: A culture of spending apathy sought to discover the attitudes and practices of employees (from junior executives to directors) with purchasing responsibility and how they impact business operations. 516 business people – across a large range of industries including IT, retail, manufacturing, public sector and telecommunications – were interviewed in March 2013 for the report.
A ‘culture of apathy’
Overall, the report findings illustrate an ingrained apathy towards smarter supply chain spending among UK businesses, stemming from a legacy approach to managing supplier relationships and an unwillingness of staff to challenge the status quo.
- A lack of purchasing control – There is a significant absence of company-wide controls and processes and limited strategic thought towards purchasing.
- 49 percent don’t know if their business has a purchasing process, have no process or do their own thing when managing a supplier tender.
- 65 percent of junior management are able to make some or all purchasing decisions with no approval from senior employees or insight at board level.
- less than half of all companies, 49 percent, have enterprise-wide purchasing processes indicating an alarming lack of company-wide supply chain control.
- A lack of regular supplier review – Through regular supplier reviews, companies can identify holes in the supply chain. However:
- 56 percent rarely speak with suppliers, don’t trust them or only speak with them if there is a problem.
- 59 percent of businesses will not review suppliers unless there is a problem.
- UK businesses are focused on cost-cutting, not smarter spending –Organisations are thinking short-term instead of long-term. Many changes are reactionary rather than proactive.
- 60 percent of companies said a need to cut costs triggers a supplier review.
- A lack of value is attributed to the purchasing function – Purchasing very much comes as a secondary priority to the primary job role and therefore isn’t seen internally as important enough to warrant investment or training.
- Nearly half of professionals asked confessed they just use the previous price without any detailed analysis to benchmark suppliers or don’t benchmark at all due to a lack of time.
- a quarter of respondents say that if it were their own money, they would be far more careful with it!
- 64 percent of sole purchasers have had no formal purchasing training.
A Smarter Spending strategy – the future
Rob Allison, managing director, ERA, said: ‘Many employees don’t understand the value of managing the purse strings, or even appear to have the motivation or board support to affect real change. A complete culture, attitude and organisation shift is required for companies to see operational efficiencies and increased profitability. And more value must be attributed to long-term smarter spending across the entire supply chain if businesses are to find growth in the future.’
1 Implement company-wide supply chain guidelines. These should include clear company processes and policies for employees and for reviewing suppliers – organisations need to answer when, why, how and who makes these supplier review decisions.
2 Develop and enforce an integrated approach to purchasing decisions. Present quarterly supplier reviews to the board. These should not just focus on cost reduction but metrics such as quality control, supplier relationship and company reputation.
3 Create a key skills framework for people responsible for frontline purchasing decisions. Invest in the purchasing function through ongoing and regular training to be able to implement best practice purchasing.
4 Implement a cost management strategy. Ensure you have the expertise in-house or via an external source to devote time to the purchasing process and build effective long-term supplier relationships.
Full report: http://bit.ly/11Ct4OE
For more information please visit: www.smarter-spending.co.uk
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About Expense Reduction Analysts
Expense Reduction Analysts (ERA) is a UK-wide network of specialist procurement advisors. Its teams enable organisations to save money and boost business performance through effective procurement, improved supplier management and smarter spending habits.
ERA’s sector specialists build long-term relationships with medium to large enterprises, going beyond short-term gains to deliver objective analysis, informed market expertise and continued financial benefits.
ERA works across many industry sectors – including retail, manufacturing, logistics and managed services.