Management
MORE THAN A quick cAsH fix
Improving procurement not only savesmoney in the short term, it can dramatically improve a company's valuation in the long term, explains BravoSolution's Daniel Quinn
With many companies facing tough times, procurement is being recognised as an essential component of corporate strategy. It is well understood that buying more efficiently can bring big cash savings and increased revenue through improved quality of goods and services as well as more reliable supply chains, but its strategic impact is now starting to elevate the chief procurement officer (CPO) up the corporate agenda.
Procurement projects are traditionally aimed at reducing the
purchase price of goods and services and improving on the value delivered, through for example, increased functionality or increased quality of service. They often produce very quick wins which can amount to millions of pounds of value for larger organisations.
Savings can often be identified in a number of areas including
indirect, direct categories and now even very complex categories like transportation or construction. At the same time, the supplier base can be streamlined and procurement processes rationalised.
Think long term
A systematic drive to improve procurement skills, process and infrastructure can also delivermore far-reaching benefits to customers and investors. Theymay not be so immediately obvious, however they are likely to be of far greater value in the
24 | September 2011
longer term. In fact, analysts state that the right blend of skills, process and technology improves a company’s financial performance by 30 pence on every pound spent. Savingmoney on third-party spend and streamlining procurement processes can often deliver savings to the 'bottom line,' farmore quickly and effectively than improving the top line by increasing sales. By savingmoney through the traditional procurement tactics of aggregation, rationalisation and negotiation, profitability can be improved dramatically.
Daniel Quinn hasmore than ten years professional procurement and management experience
The real effect is that an increase in profitability could lead to
a direct rise in the company’s earnings and, if maintained, its subsequent market valuation. Improved procurement and organisational economics can create competitive advantage. Lower prices and improved value and quality in the goods and services on offer, especially if they are embedded and sustainable, can lead to the organisation differentiating itself from the competition. This can in turn lead to a better reputation in the marketplace, growing customer loyalty and improved sales.
These benefits can further strengthen the company’s reputation, often driving a virtuous cycle of overall
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www.electronics-sourcing.co.uk
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