A typical business (If such exists) is likely to spend;
� 74% of its turnover on Payroll, Raw materials & Depreciation;
� 16% on Non-core expenditure,
� Leaving 10% profit. (Lyson & Gillingham, 2003).
While according to DeBoer et al (2003, p.911) �.large firms spend 30% of revenue on Non Product Related purchases.� According to Thompson (1996, p.7) �Applying a strategic approach to a poorly purchased good or service generates a saving of between 20 per cent and 40 per cent in expenditure.� If, therefore, expenditure on the 16% SMEs spend on non-core procurement could be reduced by 25%, profit would leap by 4% to 14% of turnover (40% growth) without increasing sales. More conservatively, if non-core costs were reduced by 10%, profits would still increase to 11.5% of turnover, or 15% growth in profit. This is also in agreement with findings by Parry et al (2006) who found that cost benefits in the region of 20% were feasible when engineering commodities were outsourced.
This dissertation seeks to determine to what extent businesses are actually achieving best value from their non-core procurement or, conversely, how much potential there is to increase profits by finding cost effective methods by achieving best value.