Savings Are Disappearing, Cost Are Risings, and Value is Vanishing. Is Your Procurement Infrastructure to Blame?

A recent 2013 CPO survey from Deloitte reported that only 61% of organizations are somewhat effective at delivering value for stakeholders. There are a number of explanations for this, but the most prevalent reason stated was a lack of business alignment.

In addition, 79% of CPOs consider cost reduction to be their primary goal. There are various reasons for this as well, but a common reason, cited in multiple studies, is a lack of focus around demand management.

Not only did Aberdeen echo this focus on cost in their recent publication on the Top Three Supply Chain Execution Priorities for 2014, but they also indicated that the most critical strategic action for Procurement is to improve internal cross-departmental systems, process collaboration and integration and to align the Procurement strategy with organizational goals.

If you put all of this together, it tells a story. The organization is still seeking cost savings because potential savings opportunities are not captured. There is a lack of compliance with contracts and purchasing policies. The potential cost savings are not captured because demand is not properly managed, despite best efforts. Users are not buying the right product, not buying from the right supplier, not buying at the right price, and/or not buying at the right time (and incurring extra costs by way of expedited shipping). There is a lack of visibility into true demand. This lack of demand management is partially due to the lack of an aligned Procurement strategy consistent with organizational goals — and the lack of alignment is largely due to a lack of actionable intelligence.

In other words, many Procurement organizations, including those with (relatively) modern eProcurement or eSourcing software solutions are blinded by a lack of visibility, hindered by the absence of a platform that supports actionable intelligence, and still challenged with achieving basic contract compliance.

A key part of the solution is missing. Specifically, it is the part that provides visibility into the organization’s real buying behaviour.

So how do you fill the gap? You acquire a Procurement Marketplace that provides users with visibility into policies, contracts, and goods and services readily available for consumption and purchase.

What does such a solution look like?

The Power of Compliance Join the doctor of Sourcing Innovation and Vinimaya at 13:30 PDT / 16:30 EDT / 20:30 BST one week from today on Thursday, October 16 for our webinar on The Procurement Marketplace and the Power of Compliance where we will discuss how a modern Procurement Marketplace can significantly reduce the 30% to 40% of negotiated savings that disappears every day when buyers buy off-contract and incorrect invoices are overpaid.

Attendees will be the first to receive Sourcing Innovation’s New White Paper on The Procurement Marketplace and the Power of Compliance.  Register now for The Procurement Marketplace and the Power of Compliance and get a leg up on your competition!