According to a new report from managed-service company, Forum Group, two in five SMEs have either decreased the number of sites they operate across or let staff go to manage supplier cost fluctuation.
The Forum Group surveyed 453 businesses to examine and quantify how the operational expenditure of SMEs, and mid-market companies impacts on business growth and productivity.
The report found that 66 percent of respondents have seen employee head count restricted, or profit margins decrease due to the impact of increased operating expenditure.
“It is worrying that such a large number of organisations feel they need to resort to redundancies to get a handle on hard costs,” said Forum CEO, Bill Papas. “We know cost of doing business is increasing, and the strain this is putting on business, particularly SMEs, means companies need to look for new ways to make the most of their operating expenditure to better manage inefficiencies.”
The report states that over the past 12 months, only 20 percent of operators have actively looked at ways to reduce their largest operating expenditure, which is only down slightly from 22 percent three years ago.
In addition, 30 percent of respondents said they have increased the number of suppliers servicing their organisation over the last year, and that more than half (60 percent) of businesses claim they can’t change suppliers due to existing contracts and penalty fees, or personal relationships.
Papas said rising costs and operational issues can often distract business owners and managers from their core business.
“The costs associated with managing multiple supplier arrangements is often overlooked and most business owners and managers don’t have the time or knowledge to identify the best services or suppliers, or how to better manage the increasing cost of doing business. They may search online for a quick fix, or perhaps look to their own network and suddenly find themselves in a situation where they have too many suppliers to handle,” he said.
“SMBs should challenge their suppliers to improve and streamline their services so they can prioritise business productivity and growth.”
Other findings from the research include:
- 14 percent of SMBs have up to 10 suppliers
- 56 percent of SMBs review their supplier contracts annually
- 5 percent of SMBs are not clear on why their supplier costs have changed over the last three years