Savings not always generated at the supplier. Look inside!

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AlanLow_2013.jpgAlmost 20 years’ experience benchmarking goods and services has taught Alan Low, CEO of Purchasing Index (PI), that improving efficiencies and generating savings often has nothing to do with an arrangement with a supplier. He spoke to SmartProcurement about other avenues that lead to great savings.


SmartProcurement If savings can’t be made with the supplier, what other savings opportunities might apply?


Alan It’s hard for organisations to make sustainable savings without changing behaviour and/or process. That normally involves the whole organisation. Take domestic air travel, for instance; the real savings opportunities lie in persuading travellers to book further in advance and to use low-cost carriers. Both of these rely on employees changing behaviour. Some of our clients are collaborating with their Travel Management Companies to assist in changing culture and behaviour, but the savings will be made internally.


SmartProcurement Have you noticed any interesting market trends in recent years?

 

PCindices_against_USDollar_Euro_indices.pngAlan We have. Take PCs, for example; recent benchmark reports have shown users expanding their choices to Tier 2 suppliers (Toshiba and Mecer) and away from the traditional Tier 1 suppliers (Dell, HP and Lenovo). The PC market in RSA is very competitive and as we track the average movements in desktop and laptop prices, we can see that they bear no relationship with the movement in the Rand/Dollar and Rand/Euro exchange rates, as the graph alongside shows. And this is as PC model performance improves quarter on quarter.


In our experience global contracts often disadvantage some part of the organisation. One needs to have independent comparisons to be sure that these agreements still provide the value their originators believed they would.


Another good example would be staff catering, where organisations have realised that good quality catering can be seen by staff as an employer differentiator. More organisations are trying to influence the eating habits of their staff by introducing more healthy and nutritionally-balanced options to the menu and several of our benchmarking clients use the services of a dietician to assist, for instance, diabetic staff to eat more appropriately. There is a growing realisation that diet influences staff productivity; and this doesn’t necessarily have to cost more.


SmartProcurement How can benchmarking help procurement professionals?


Alan Procurement departments have to win the hearts and minds of their internal clients; no organisation gives central procurement a mandate these days. Benchmarking provides procurement and the whole organisation with opportunities to improve efficiencies and make savings. As purchasing professionals have to be good marketers, so benchmarking provides independent validation of the value of procurement and reinforces the need for change in many spend areas, highlighting, among other things, the cost of personal and/or technical preference.


PI provides detailed, anonymous comparisons between participating organisations, not just on price and costs but also on how goods or services are used within each organisation. It covers such matters as service level agreements, coverage, utilisation and much more. It gives each participant a comprehensive view on improving efficiencies and where they can make savings.

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