Tuesday 22 April 2014

Finding Cost Savings Opportunities Through Maverick Spend!

Authored by Azra Sultan

Have you ever thought of motive behind maverick spend by an employee? Maverick spend refers to purchases made while deviating from organizational procurement policies and procedure. It is hard to hear but it's management's fault; the internal processes, inefficiencies and lack of controls are the reasons behind the maverick spend. The personnel practicing maverick spend is considered as an offender who precludes purchasing contract and organizational policies which ultimately contributes towards raise in costs. Well it is often observed that there is another group - with no malicious intent; yet flout a company's purchasing policies. 

Just think about the opportunity available through maverick spend. Yes, it is absolutely possible, provided a purchaser is determined to induce new sources of supply and put the existing contractual vendor in a furious competitive environment enabling them to rethink their sales strategy and bring down the cost which ultimately adds up to your bottom line. While working with various organizations, I have experienced where on one hand procurement professional opted to go for maverick spend yet had found an opportunity through visibility into supply industry to further bring down the cost. 

Do you have any experience to share where the maverick spend turned into cost savings? Please do share with us!

Tuesday 15 April 2014

Supplier Can Provide Real Value To Your Organization

Authored by Usama Shahid

In many organizations procurement department start training their suppliers to improve their efficiency and performance. So they can get the better results from their strategic vendors in the shape of timely deliveries best quality by eliminating other risks. 

Last weekend, we had a wonderful gathering with the bunch of folks from Sourcing and logistics Departments of some nonprofit organizations. They randomly started discussing about the importance of well-groomed supplier in their daily supply chain cycle and I am very much agree with their prospects that “Supplier should be consider as a central point of procurement”. 

Wednesday 2 April 2014

Procurement & Sourcing: Still Too Focused on the Primary – Cost Reduction and Savings

In a recent ISM Study, 545 businesses cited their top three priorities for 2013:
  • Improving Cost Reduction and Savings.
  • Revenue Growth and Profit Improvements.   
  • Risk Management.                                                                                                               

Interestingly, 60% of respondents noted Improving Cost Reduction and Savings was their number one priority. There was a large drop to 30% of responders who cited Revenue Growth and Profit Improvements, and 28% of responders focused on Risk Management, to finish the top 3. Similar to the elections of 2012, most are focused on the front runners for the primaries, disregarding the secondary candidates and “rest of the pack” in terms of priorities. Typically the secondary and rest of the pack are a critical focus and need attention, as these are becoming important and can have a critical impact in the near future.

In 2013, companies still see Cost Reduction and Savings as the focus for their Procurement and Sourcing teams. While Cost Reduction and Savings is a key part of the Procurement and Sourcing function, it isn’t the only one. It is apparent that Revenue Growth and Profitability has moved up in terms of significance, surpassing Risk Management; however optimistic, it is still relatively low in the minds of the masses.

While an impact to profitability can be felt with a focus on Cost Reduction and Savings, so too can an impact on revenue when one is focused on the right sources: purchase part and service cycle time and time to market. The point is the majority of companies are still too focused on one aspect of Procurement and Sourcing, leaving an opportunity to fuel more growth and supplier relationship improvements on the back burner.

The good news is revenue and profitability together are becoming more important for Procurement and Sourcing, signaling a change in the C-Suite’s perception: Procurement and Sourcing is critical to meeting the business forecast.