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Don't save costs, add value


25-May-11 09:58

Yesterday the Procurement Leaders Network held a forum event in London, which was educational in illustrating how fast procurement seems to be moving and how far it has come.

 

The PIU has long identified organisations that are moving into managing their value chain as a sign of maturity. Previously, companies have looked at cost networks, moving from total cost ownership to looking at the broader area of connecting areas which impact the bottom line.

 

It was interesting to see how many presentations included references to value chains. However, although the delegates seemed to appreciate the term, there was some confusion as to what it meant. Some framed the system through CSR: one chemical organisation wished to link its suppliers to its corporate values, although it retained its plan to negotiate contract prices down.

 

However, leading companies are moving to the value chain. Andrew Hinkly, CPO at AngloAmerican, explained the way in which his organisation was making greater use of local procurement. Previously, this was considered as ’tail’, but now Anglo is trying to unlock value in hitherto unappreciated areas.

 

Added to this, during discussions that followed the PLN Awards, it emerged that the judges also believe that standards are rising.

 

Most interestingly the judges revealed that the most successful entries had not talked of ’procurement’s central role’, but instead discussed ’the businesses’. The prize winners viewed procurement as a facilitator - across the business and within the supply network - delivering value to the business.

 

Not all organisations are ready to do this. Those that do seem to be delivering not just savings, but value too.


Jonathan Webb Jonathan Webb is Head of Strategy Research at Procurement Leaders. Jon specialises in third-party risk, category management and strategy research and draws on experience working for, among others, PwC and international think-tank Transparency International. Follow Jon on Twitter: @j_p_webb

 
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