We caught up with our Business Growth Partner for Virtual Procurement, Chris Britton, to understand what the top 3 challenges are that our clients are seeing when looking to engage with Ebit and our Virtual Procurement team.
Indirect procurement is the purchasing of goods and services that are not directly related to the production of a company’s goods or services – i.e. everything you need to run your business. This includes a range of products and services ranging from small items like office supplies to larger spend areas like Marketing and Logistics.
For businesses to be successful, indirect procurement is crucial for maintaining operational efficiency/cost-effectiveness while ultimately unlocking value to support the strategic objectives. But you already knew all of this, that’s why you are here.
So, why are we here? Well, understanding market trends and themes in indirect procurement is essential for business leaders. Saving money, managing suppliers, and embracing digital transformation doesn’t just happen. By staying abreast of market trends and adapting skill sets based on requirements, businesses can navigate the complexities of indirect procurement and drive sustainable growth.
Cost optimisation and savings
It wouldn’t be a blog about Procurement if we didn’t talk about cost optimisation and savings, a primary driver for businesses and, therefore, those of us responsible for Indirect Procurement.
Our experience demonstrates that by strategically managing and reducing costs associated with indirect goods and services, businesses can enhance their overall operational efficiency and financial performance. Our clients are focussed on cost optimisation, this is allowing them to redistribute resources more wisely and ultimately improve their bottom line.
The biggest driver we are uncovering when talking with organisations is the need to identify areas of potential savings, negotiating favourable terms with suppliers, and supporting our clients to be more efficient in their cost management strategies. Alongside this, the desire to drive quality has come back full circle and we are now supporting businesses to drive visible quality improvements across areas such as brand perception, service levels all with a strong focus on achieving sustainability goals.
Some of the biggest areas we are predicting to be supporting our clients over the next six months are Maintenance Repair and Operations, Marketing, Logistics, Consumables and Supplier Due Diligence.
Examples:
- MRO – Inventory levels have risen across the board post covid, and organisations are now looking to unlock that value.
- Marketing – Agencies have had the upper hand for many years, with complex language and hard to benchmark pricing structures. Organisations are now looking for external support to help negotiate these contracts with expertise, to level the playing field.
- Logistics – Triple-digit savings are achievable, but logistics is now playing such a vital role in how your customers feel about your brand that it is not just about the lowest price. Tracking apps, delivery times, demand forecasting tools and much more are all customer value adds, which makes the process more complex.
- Consumables – Similar to MRO, the stock has been hoarded over the years and suppliers are reducing their pricing. The market is continuing to consolidate which is allowing suppliers to sell through acquired stock.
- Supplier due diligence – Closely linked to ESG, KYC type regulatory visibility and compliance is coming to the world of procurement. Reputational risk matters, and we are supporting our clients to navigate this and implement the tools required to keep Directors out of prison and regulators out of the company bank account.
Supplier relationship management
We are having more and more conversations with relationship management in mind. Supplier relationship management is so important. By building and maintaining strong relationships with suppliers you are ensuring a reliable and cost-effective supply of goods and services.
Improving relationships helps us to better negotiate terms through a deeper understanding of each other’s needs and capabilities. By fostering strong relationships with supplier’s businesses can enhance their operational efficiency, mitigate risks, and drive long-term value for both parties involved.
Digital transformation and automation
Indirect procurement teams play a pivotal role in supporting the digital transformation and automation of businesses by strategically acquiring the right tools, leveraging suppliers’ knowledge, and engaging with subject matter experts.
We are working with more and more Procurement teams to help them collaborate with internal stakeholders to identify and invest in digital tools and technologies that align with the organisation’s strategic goals.
Engaging with subject matter experts within and outside the organisation helps teams gain valuable insights into emerging technologies, industry benchmarks, and innovative solutions. This will help the business make informed decisions and implement digital transformation initiatives in indirect procurement processes.
By working closely with suppliers, procurement teams can tap into their expertise to understand the latest industry trends, technological advancements, and best practices in digital procurement.
Understanding market trends and themes in indirect procurement is essential for business leaders. By strategically managing costs, improving supplier relationships, and embracing digital tools and technologies, businesses can enhance operational efficiency, mitigate risks, and drive long-term value for all parties involved. Call me if you want to discuss further.
