It’s not uncommon for procurement teams to believe that everything is under control – even during a time of economic turbulence and knee-jerk decision making. But making assumptions about purchasing can actually prove extremely costly for businesses.
When we first start speaking to a finance director or procurement team, we frequently hear that, ‘if spend is within budget, and incumbent suppliers are delivering in line with their contracts, there’s nothing to worry about.’
On the face of it – and with everything else that’s been going on in recent months – this hypothesis is understandable. However, poor procurement can silently erode profitability. And it’s often only through independent benchmarking and validation of pricing and service level agreements, that it’s possible to truly assess value for money against every line of the purchase ledger.
So where should you begin?
Start by challenging yourself to think honestly about five operational assumptions:
1. I’m within budget, so all is well
Even if you are in budget, is all genuinely well, or as you now prepare to navigate your ‘new normal’, do you need more from your supplier(s)?
2. Suppliers give the same price to all organisations
This simply isn’t true – many suppliers price according to the scale or timeliness of an opportunity, as well as the ability to drive margins. Sadly, a pricing structure shouldn’t be taken at face value without at least some gentle questioning – or better still an independent audit. [link to audit landing page]
3. I benefit from a national buying deal
Our experience tells us that local or regional agreements can achieve better results, even when talking to the same supplier.
4. I have an experienced procurement team so we’re fine
Investing in fleet is very different to buying raw materials, for example. So, if your procurement needs are varied or complex, you may benefit from an impartial viewpoint or the expertise of a network of purchasing specialists.
5. Our suppliers are loyal so always quote the best they can
Many suppliers have gone the ‘extra mile’ for customers in recent times especially, but loyalty sadly doesn’t always result in the most competitive prices or the most attentive service levels.
How to ensure success
Key to navigating these assumptions, is:
• Carefully analysing what ‘good’ looks like, ideally with a fresh pair of eyes.
• Relying on the expertise of colleagues or trusted external partners who have undergone specific buyer training.
• Exploring whether multiple suppliers and order points, across different cost areas, is the right thing for your business (or not).
In the most basic of terms, it all comes down to time and resource.
Book your free Audit
If you would like help on your journey to savvier procurement, why not investigate the power of a new collaboration between OfficeTeam and Auditel? To celebrate the fresh partnership, we’re offering a free audit – book your audit today