Why there’s more to procurement than business-as-usual cost reduction

Date Posted: 20/03/2020 Category:
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Why there’s more to procurement than business-as-usual cost reduction

Date Posted: 20/03/2020 Category:

A procurement expert has urged public sector procurement and supply chain professionals to push back against the intense pressure to confine them primarily to cost-reduction initiatives and focus instead on demonstrating their true worth by adding value and mitigating supply chain risks.

Malcolm Harrison, group chief executive at the Chartered Institute of Procurement & Supply (CIPS), believes that the “trilemma” of possible trade wars, a stuttering global economy, and ongoing uncertainty stemming from Brexit provides procurement professionals with a “golden opportunity” to display their real value to public sector organisations.

Business-as-usual cost reduction isn’t the only trick in procurement’s hat – most practitioners have cultivated precious expertise in risk management and supply relationship management so that supply chains keep moving even in the most adverse times. 

While the pressure to deliver cost reduction remains ever present, supply chain managers and other procurement experts also know how to extract data from, say, spend analytics and greater supply chain visibility, to ensure that optimal decisions are made on the basis of solid empirical evidence.

They’re also adept at comparing the performance of suppliers and ensuring that best-practice procurement benefits goods, services and infrastructure. 

Harrison emphasises that value throughout the supply chain is enhanced in a multitude of ways, from encouraging and enabling suppliers to release their most innovative potentials to making sure that specifications are comprehensible, concise and aligned with policy objectives.

One unique way that procurement professionals can continue to add value is by managing contracts with suppliers throughout their life in order to avoid bad initial deals based on beating them down to unrealistic prices and thereby prevent any “nasty surprises” later on. 

Harrison states: “I believe there is a strong drive in UK government procurement to improve capability and focus on value.

“Only then can decisions be made about whether savings are the best and only way to drive efficiencies in a department, or whether the real focus should be value across the supply chain and good risk mitigation.”

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