E-procurement set to slash SME costs

The report carried out by research group London Economics for cross-industry internet portal GroupTrade claims to be the first piece of research to quantify the benefits of online electronic purchasing for SMEs.

The GroupTrade exchange, which is due to launch later this summer, will initially target operating costs which can account for between 30% and 60% of a company’s turnover and £32bn of expenditure a year.

Researchers focused on how e-procurement and group trading can reduce the level of indirect costs – such as office furniture, stationery and IT equipment.

GroupTrade estimates total average savings for the SME sector to be around £18bn and could rise to £24bn.

The study predicts that the purchasing model could save anaverage per year of:

£623,00 for companies between 200-249 employees

£388,100 for companies with 100-199 employees

£195,000 for operations with 50-99 employees

£51,000 for companies with 20-49 employees

‘Until now it’s been the large multinationals who have made the headlines on e-procurement,’ said GroupTrade chairman Adair Turner. ‘But SME’s account for nearly half the jobs and turnover of the UK and they too need to capitalise on the efficiencies created by the Internet.’Savings pinpointed by the report include around 30% on the cost of goods and services, which can be negotiated via an information exchange; and the remaining 70% from slashing the time and expense of searching, ordering and accounting for purchases.

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