If there was a time to take another look at
procurement savings as a way to reduce costs, improve margins, increase
flexibility, improve quality, take less time and use fewer resources, it is
According to the results of a recent
survey by Ernst & Young South Africa, in which 267 Chief Procurement
Officers and other procurement executives took part, 65% indicated more savings
as their top priority. Other areas of concerns pointed out were high inflation
in many emerging markets, and finding new ways to contain costs.
The global economic scenario is now forcing
companies to reduce costs on a sustained basis to improve bottom-line profits.
costs are sometimes considered as “fixed” and much more inflexible than
salaries and bonuses to manage, they are one of the few areas in an
organisation that still provides ample opportunities to reduce costs and
The key to a sustainable reduction in spend
is to strike the right balance of focus between supply and demand activities in
an organisation. Considering the opportunity below for both demand and supply
will assist organisations in identifying significant savings in a structured
Interestingly, even as many businesses have been through the cycle of analysing
their spend, putting a category management structure in place and then
implemented spend management tools to control it. There are many organizations
who have barely touched on indirect spend. No one can argue against a focus on
directs, but with a third of all spend on average on indirect products and
services, it represents a significant source of untapped value.
Procure to pay
The roadmap to technology can be a challenging one
with obstacles along the way. However, there is a definite sense now that procurement
technology is becoming mainstream. Customers are aware of the key
attributes to look for in a solution-going beyond a shopping list of efficient
requirements for data of what has actually been delivered.
Explore alternative suppliers
If you’re working with a supplier that’s considered
“high priced” within its industry, consider alternative sources of the products
or materials. Pay attention to the factors like ease of order placement,
on-time delivery, product quality, and even the condition of the packaging when
it arrives at the dock door. And if you can get the same perfect order service
from the new supplier, consider making the jump.
An effective supplier management framework
that fittingly lines up risk, effort and reward is a key enabler of ongoing
sustainable value creation. The framework needs to include sections i.e.
strategic, operational and tactical performance management structure and a
clear communication of organisational accountability and responsibility.
What are the challenges in your company and
do you have the right individual to solve them? If you are looking to grow your
company, we have the ideal candidates for you.
Credit: FreeDigitalPhotos.net by Stuart Miles