With spending cuts high on the agenda, public and private sectors are debating whether to pay a premium for procurement professionals.
But in the procurement and supply chain sector, the return on investment in introducing strategic procurement is typically 1 in 10. That means that if non-pay annual spend is $100m, it’s realistic to expect annualised savings of $10m within the first year of operation by engaging a Procurement Director at a cost of about $100,000 per annum. (Click here for more information on procurement salaries).
Local Governments Lead The Way
As local governments cut spend across the board, public sector departments are investigating and implementing change on how and what to buy through procurement professionals. Their priorities are looking at frontline services and efficiencies, buying more for less, and reducing spend overall.
The expertise behind a rigorous procurement process often isn’t available in-house, so local councils are often bringing in consultancies or interim managers to perform procurement reviews. The suggestions and insights coming out of these analyses include category management, contract reviews and managing supplier relationships with greater efficiency.
How Are Procurement Specialists Adding Value?
Solid initiatives are currently emerging in the procurement industry, including:
- Linking and controlling the complete, end-to-end procurement process itself; from the commissioning of goods and services to the effective management of the payment cycle
- Tightening disciplines and compliance with operating procedures
- Increasing the commercial rigour of contract management, particularly large contracts that are likely to run for long periods
- Integrating the commissioning of goods and services with astute management of the supply market, ultimately creating ‘more for less’.
Benefits Of Strategic Procurement
While many organisations invest in strategic procurement, others can benefit enormously from a centralised or collaborative procurement approach such as:
- Health organisations (which could focus on more than just conventional issues like stock replenishment)
- Charities, educational bodies and housing associations (by working together, these institutions can buy better)
- Smaller local authorities (the possibility of joining forces with larger councils could reap the benefits of aggregated spend).