The UK has the most expensive public procurement process in the EU, this is according to a new research carried out at the Centre for Economics and Business Research (CEBR) in London. The CEBR’s research highlights the need for cost reduction measures to be taken in order to make tendering more affordable for the public sector in the UK. The findings are staggering in that public sector procurement processes are 90% more expensive in the UK compared with the rest of Europe. This must be a cause for concern for our largest trading partner.
Last week, I promised to share with you the synthesis of my take-aways from this discussion. What strikes me is that supply chain management of which procurement is a vital component is practiced with enthusiasm and skill by professionals all over the world. And, it is not just the multinational corporations that strive to optimise customer satisfaction in a net value manner. Every company, irrespective of size, global footprint and industry, pays particular attention to its supply chain. Successful companies recognize the key competitive importance of supply chain management.
I’m not sure what W.B. Yeats might say about the advent of social media and if indeed “a terrible beauty is born” but I would say that something has “changed utterly”. Today, I share with you over one social medium the results of another. Over the last weeks, I have solicited the help of an international group of LinkedIn procurement professionals to help clarify real world differences between procurement and supply chain management. The 110 contributions (and counting) have been fantastic in so far as they all added value and over time turned my initial premise inside out and back again in a genuinely helpful way.
The 2011 edition of the annual Engineering & Manufacturing Supply Chain Survey has been published this week based on the responses of 120 UK-based senior supply chain managers and makes for interesting reading.
Over one-fifth (22%) of respondents admitted that their procurement and sourcing procedures and mechanisms required improvement. By improving the inbound purchasing system, this group of supply chain managers believed that their businesses could recognise a number of efficiencies and cost savings not available in their current methodologies.
Perhaps the most surprising finding of the Supply Chain Survey was that only 54% of the managers surveyed were convinced that improving their supply chain would also help improve their business’ balance sheets. For many years supply chain management experts have been advising companies on creating efficiencies for improved return on investment but the message appears to have been ignored by many in-house managers despite many success stories across most industry sectors.
Ian King, business director of engineering and manufacturing at DHL who commissioned the report believes that although most respondents believed their supply chains could be improved, supply chain improvements extend beyond cost reductions. Commenting on the results of the survey King said, “it seems that one area they [those questioned] might be overlooking is the impact that improving supply chain efficiency can have on their supply chain.”
At a time when the costs of raw materials are rising steadily and resources are becoming more scarce, businesses need to focus on the costs that they can control. Although the prices a supplier charges cannot be fully controlled, the way in which products are sourced, inventoried, assembled, catalogued or warehoused can, and any costs reduced through introducing efficiencies equate to a direct positive effect on the balance sheet.
2012 is currently being promoted as the year of the cloud, where hosted supply chain management systems have reached the level of maturity and stability required to become a ‘game changer’. For the 54% of supply chain managers who believe efficiencies improve their business’ profitability, now might be the time to investigate such platforms and recognise those savings.
When you take your invoicing to the cloud, security is always of utmost importance, this is how we deal with it here at Celtrino.
See how we helped Uniphar make huge efficiency savings by steamlining their procurement process.
A key moment of truth in any trading relationship is the demand for payment for goods/services rendered. It is precisely at this juncture that the specifics of the transaction and the quality of the underlying trading relationship comes sharply into focus.
The organisational structure of many companies means that Accounts Payable department is charged with the pay/no pay decision. Often, however, the facts speak for themselves. The orderly payment of a purchase invoice is delayed by blips elsewhere in the procure-to-pay cycle. The accounts payable department end up unfairly shouldering the responsibility for this and as a consequence are forced to develop a thicker skin than might otherwise be necessary in a well-run company, in turn raising the prospect of inter-departmental problems.
Of course, at times, the supplier can also be at fault either unilaterally or almost seemingly in conspiracy with his customer contacts – but this is a consideration for another day. Some decision makers in buyer organisations can at times be accused of forcing a discipline on its own staff via its supplier base (instructing the supplier in no uncertain language that an order from a buyer representative must not be accepted without a valid PO number – is this good trading relationship practice or a circuitous route of exerting discipline on wayward colleagues?).
Buyer procurement process rigidity is a so called “best practice” employed by some organisations where the process can seemingly become the key KPI. Perhaps given the advances in connectivity of IT systems in conjunction and the partnership model, such an approach may be worth rethinking. Consider the potential improvements in a working relationship if transparency is introduced into the supply chain?
Enter automated accounts payable solutions. Using Celtrino’s end-to-end supply chain automation systems, it is possible to monitor the entire process and immediately identify where the cause of a delayed payment is, and with whom the fault lies. Using the built-in transparent reporting facilities of Celtrino, buyers and sellers can quickly and easily identify and resolve payment problems, reducing friction between parties and preventing accounts payable taking the blame once more.