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Wednesday, October 26, 2016

Hidden Treasures of Procurement

Was involved in procurement at a number of different levels in the enterprise.  This Bain & Co article on the topic.   It is a gold mine of possibilities.    A good place to first think about analytical methods.   Lots of solutions are floating out there, off the ehelf and tailored to your needs.

Unearthing the Hidden Treasure of Procurement
October 12, 2016 Bain Brief By David Schannon, Sam Thakarar, Klaus Neuhaus and Raymond Tsang

The CEO of a global insurance company knew procurement was sitting on a trove of hidden savings. Year after year, regional teams working separately trimmed only a modest $15 million from the company’s $3 billion cost base. Determined to unearth greater gains, he gave the chief of procurement a strategic remit and agreed to build a new global operating model. As the company’s purchasing experts began to work side-by-side with the CFO and business unit leaders, big savings started to flow. Within two years, the company had transformed its buying and spending patterns, netting more than $200 million in savings.

Most companies only scratch the surface of procurement efficiency. Those that dig deeper discover that the savings can be dramatic. External purchasing is the largest single expense category for most firms, averaging 43% of total costs (see Figure 1). Bain research shows that world-class procurement organizations can reduce a company’s purchasing cost base by an average of 8%–12% and deliver additional annual savings of 2%–3%. .... " 

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