Cost Saving by Michael

What we have learned in 2016 that can help with better procurement today

If someone had categorically stated on the 1st January 2016 that Leicester City would be Premier League Champions in 5 months, that the UK will vote to leave the European Union in 6 months and that in 11 months time the citizens of the US will vote Donald Trump into the White House then you'd have probably given them a sympathetic smile and moved onto another subject that they may be able to handle.

Whilst the Leicester City triumph has given every fan of one of the 92 "other teams" (and beyond) a glimmer of hope, the other 2 victories/ defeats (please delete as appropriate depending on your political views) have caused a bit more unrest and uncertainty for some. And there's one thing that's certain about uncertainty - as human beings, we're not too keen on it.

Whilst basic predictions for future events may have become slightly harder to predict, businesses can still manage and navigate successfully through any resulting change. Many companies know that procurement can help them do this. In its simplest form, imagine a different approach to procurement wiping more than 25% off your cost base. Those sorts of cost savings could make you far more competitive and resilient couldn't they?

But some finance directors, managing directors, financial controllers and procurement teams, don't realise that procurement could help solve some of their most pressing challenges. For example, by altering the system and process a company uses, to get products to market, they would need fewer personnel and customers would be happier with their super speedy delivery. Such businesses run the huge risk of a serious disconnect between procurement, the supply chain and their overall business strategy. And whilst we're on the subject of the business, procurement and the supply chain, why do some businesses have a "no name policy" or refuse to put professionals through to the appropriate people? How does that business know what's available, what's new, what's changed regarding procurement and the supply chain..............................? We choose not to make cold calls (we gain new clients in a very different way) but we still speak and listen to any sales team that calls us; some are very much worth listening to.

Through speaking with current clients we appreciate that most of them acknowledge that the person in charge of procurement find it easier to do their job when they're able to call on external expertise. The return on investment (ROI) here is clear. As procurement departments take on an ever more complex array of tasks, hiring staff to cover every supply or eventuality, from fleet management to logistics or utilities and supplies to payment systems, it's both unrealistic and a huge waste of resources. Especially as the majority can be sourced at no-cost to the organisation from an outsourced procurement partner like us.

When negotiating, getting a sense of which suppliers are performing well (and which aren't or which are about to be bought out by another etc.), the current state of the market, how hard and on what you can barter before quality of service falls away or where suppliers weight contracts in their favour, can be the difference between a good deal and a bad deal from your supply chain. But how does an organisation know all of this? And how do they know if their perception of "good" is ahead or behind the curve?

Organisations need to redefine their expectations of procurement. The traditional key performance indicators (KPIs) may still be relevant, but why not also measure them on their ability to drive innovation, reduce complexity and generate profit? Procurement in private and public sector organisations doesn't have to be taken for granted. Procurement can be a strategic asset. But that can only happen with buy-in from the top (and in some cases, the personnel directly below them). Should more directors make decisions on procurement regarding what they know and want to achieve, rather than what they think they know and what their team is indicating is achievable?

While Brexit may not be welcomed by some businesses, the panic that followed the vote in some boardrooms has likely subsided a bit. But Brexit will undoubtedly ask fundamental questions about the business models of some organisations, their strategies, processes and supply chains. If these companies are to succeed in a post-Brexit world, procurement needs to be at the heart of that.

The election of a President in the US, without any political experience, may also create uncertainty but uncertainty often brings with it unprecedented opportunity. Properly planned, proactive management of costs and ongoing contract and supplier management can help to mitigate the impact of market and currency fluctuations and price increases. Businesses that recognise the strategic value of procurement can go beyond cost savings, drive efficiencies, become more flexible and agile and, by responding more effectively and quickly to the marketplace, outsmart their competitors.

The ramifications of a wide range of current affairs are likely to increase the focus on cost, efficiency and supply chain. Procurement teams need to be braver and more vocal than ever before. Uncertainty presents procurement professionals with a real opportunity within organisations to initiate change. So why not start by giving us a call on 01226 611511?

"Organisations need to redefine their expectations of procurement. The traditional key performance indicators (KPIs) may still be relevant, but why not also measure them on their ability to drive innovation, reduce complexity and generate profit? Procurement in private and public sector organisations doesn't have to be taken for granted. Procurement can be a strategic asset."