Melaye Ras-Work, Vice President of Efficio, explains how effective procurement can transform your business
Procurement represents one of the biggest opportunities for businesses today. Until recently, it’s an opportunity that until recently has gone largely unrecognised – but that’s changing. As a cost, procurement typically represents 30 – 70% of a business’s revenue, so getting it right can have a significant effect on their bottom line. That’s why successful companies have recognised that having a world-class procurement is a source of competitive advantage.
Understanding the opportunity in procurement is one thing. Creating a world-class procurement function, however, has a number of challenges:
- Skills – the complexity of modern procurement, managing hundreds of internal stakeholders, dozens of categories and thousands of increasingly global suppliers, requires a unique mix of hard and soft skills. As companies wake up to the potential of procurement to add value, attracting and retaining talent is becoming increasingly critical.
- Tools – many CEOs and CFOs are frustrated at procurement’s inability to accurately demonstrate bottom-line savings. Having a robust mechanism for measuring and tracking savings is the single most important metric that a CEO or shareholders will use to measure procurement performance.
- Supplier management – research shows 50% of procurement benefits are eroded over time if there is not a process in place to actively manage supplier performance.
How Efficio can help
Efficio are ‘doers’, not just advisers. We have skin in the game, which means we make sure that what we recommend is actually implemented, and what we implement actually sticks. We also now partner with a large proportion of our clients, giving them our people and providing them with our proprietary eFlow technology, to underpin the benefits over the long term.
A good example of our approach is Thames Water, where we jointly addressed £750 million in spend and delivered £50 million in savings over the last five years along with significant quality improvements, through a partnership approach. It’s also won a number of awards, including an innovation award for our partnership.
1. Successful companies recognise that having a world class procurement function is a source of competitive advantage.
2. Research shows that 50 per cent of benefits achieved from consultancy projects get eroded over time if they aren’t actively managed. Having access to procurement experts over a longer period of time through a managed procurement service allows companies to address wider elements of spend and to deliver greater and more permanent benefits.
3. Future trends to look out for in procurement include greater importance placed on supplier relationship management, attracting and retaining talent will be key and, due to the drop in cost of development, more technology will be developed by practitioners for practitioners.
To find out how effective procurement can transform your business, contact us or visit our website.