Cost reductions needed NOW!

Some of the trauma associated with the current global crisis has been due to the speed with which the markets have changed. Twelve weeks ago Platinum was trading at $2,300 an ounce, today it is at $840 – a drop of almost two thirds. With the precipitous decline in global stock markets organisational management are still trying to understand the effect that this will have on their profit and loss accounts and balance sheets in the next one to two years.

Senior management understands the current skills shortage and many South African organisations are putting emphasis on realising savings rather than cutting staff. Procurement departments and business units are therefore under the spotlight to deliver real and sustainable savings.

“From Purchasing Index’s (PI’s) experience of benchmarking a wide range of goods and services, much of the savings opportunities lie in the way organisations use the goods and services that they consume. And yet procurement has to persuade their customers that they can add value and save money without making them less effective. Mandates from top management are thus a thing of the past as procurement must win hearts and minds!” Alan Low, Managing Director of PI, explained to SmartProcurement.

It is furthermore PI’s point of view that the ability to identify savings requires the following:

  • Procurement functions must work closely with proven suppliers and service providers;
  • Procurement must get closer to their internal clients to understand what commercial interventions will help them to run their businesses more effectively and save money; and
  • A full and complete understanding must develop as to how money is spent throughout an organisation, by whom and on what through Spend Analysis.

This last point is fundamental to a seamless implementation of cost savings between purchasing and the business units in any organisation. It will help procurement professionals to engage their customers and management with accurate and up-to-date information, and will allow all the interested parties to make informed decisions. Spend analysis empowers procurement, while making the function much more productive.

In conclusion, spend analysis tools need to be:

  • highly visual, flexible, intuitive and easy to use;
  • provide real-time information;
  • based on accurate data; and
  • drill down to detail.

Alan Low can be contacted on the details below:
Telephone: +27 11 803 0005
Cell: +27 84 890 0005

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