Procurement Professional is the official publication of CIPS Australasia

#114 - How to make BIG savings quickly - through centralisation

16 Feb 2010

The recent article on Wal Mart’s central intentions from Supply Chain Digest [6 Jan 2010], www.scdigest.com tells many buyers what they already know – that the key to fast, impressive savings off price is very A B C:

A.      Centralise procurement and mandate purchasing through the department

B.      Buy direct from manufacturers where possible

C.      Harvest savings centrally into a new suspense account held by the CFO

This price-focussed approach isn’t right for everyone all the time of course; but it doesn’t half work when:

1.       You are starting a procurement effort in a Greenfield site,

2.       You are dealing with a organisation that has matured to fully decentralised

3.       You have internal clients and stakeholders that just don’t buy-in.

But if you have;

4.       A mature procurement effort in your organisation

5.       Complex procurement needs

6.       Stakeholders that get it with a culture that support procurement efforts and teamwork

.... you might want to think more deeply before acting.

Generally things go in cycles. Centralised savings or local profit focus tend to be mutually exclusive. Or at least on a swinging pendulum, as Hopkins argued in the CIPSA white paper from 2007: www.cipsa.com.au/professionalresources/whitepapers/thecasefordecentralisationinpublicsectorprocurement

CEO’s often try to get both benefits – by changing the organisation around every three years or so:

I.                    Matrix organisation today for profit focus and market agility –

II.                  Functional organisation tomorrow to harvest savings and bring professionalism 

At the end of the day though; always do what is right for your organisation at the point in time your needs can best be defined.

There, that should help.

The Buyer – posted 16 Feb 2010

The views of THE BUYER are personal and are not necessarily those of Procurement Professional magazine, BTTB Marketing nor CIPS.