Profit from Procurement. Jose Oliveira Valentede. Читать онлайн. Newlib. NEWLIB.NET

Автор: Jose Oliveira Valentede
Издательство: John Wiley & Sons Limited
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Жанр произведения: Экономика
Год издания: 0
isbn: 9781119784913
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       Library of Congress Cataloging-in-Publication Data:

      Names: Klein, Alex (Author of Profit from procurement), author. | Whatson, Simon, author. | Oliveira, Jose, author.

      Title: Profit from procurement : add 30% to your bottom line by breaking down silos / Alex Klein, Simon Whatson, Jose Oliveira.

      Description: Hoboken, New Jersey : Wiley, 2021. | Includes index.

      Identifiers: LCCN 2021000246 (print) | LCCN 2021000247 (ebook) | ISBN 9781119784739 (hardback) | ISBN 9781119784982 (adobe pdf) | ISBN 9781119784913 (epub)

      Subjects: LCSH: Industrial procurement. | Business logistics.

      Classification: LCC HD39.5 .K534 2021 (print) | LCC HD39.5 (ebook) | DDC 658.7/2—dc23

      LC record available at https://lccn.loc.gov/2021000246

      LC ebook record available at https://lccn.loc.gov/2021000247

      Cover design: Wiley

      What Follows Is a True Story

      Many years ago, I was at a cocktail party hosted for expats in London, with my wife. Many of those present were from the big New York investment banks. At one point, I started chatting with one of these individuals.

      “So, what do you do?” he asked.

      “I'm a consultant.” I replied.

      “Consulting in which field?” he asked.

      “Procurement” I replied, at which point he looked at me with an expression of disgust and said, “Excuse me while my eyes glaze over,” then turned around to signal that the conversation was over.

      Now, that's very rude behaviour, but that's not the point. The point is that Procurement has such a poor image that it's not even deemed worthy of a conversation by those who consider themselves to be at the top of the business food chain. Procurement is just not exciting, and it's certainly not sexy.

      Yet in the majority of companies, Procurement is far from optimized, and there is a massive prize to be had if we could only do a better job. Since Procurement represents between 50 and 80% of a company's costs depending on the industry, and since most savings extracted from that spend flow straight to the bottom line, then I'd say that makes it interesting!

      In this chapter, we will set the scene for the book, by examining why there is an opportunity in Procurement, what the size of the prize could look like, and why many companies have failed to cash in on the promise to date. At the end of the chapter, we provide some background to the book, along with an overview of what you can expect from the remaining chapters.

      Let's now step right back and examine why there is an opportunity associated with Procurement. There are, in essence, two reasons: (i) Procurement is typically a company's largest cost bucket, and (ii) in most companies, that cost bucket is not optimized. Let's look at each in turn.

      Procurement represents between 50 and 80% of a company's total costs, depending on the industry. That feels like a big number, but that's just because external spend is not usually counted in one place. A company's external spend contains so many things (from office supplies to raw materials to factory maintenance services to energy, fleet, marketing, and IT), fragmented across so many business units, geographies and budget lines, that it's rarely seen in aggregate (see Figure 1.1).

Schematic illustration of the Procurement Spend as a Percentage of Total Cash Outflows.

       Figure 1.1 Procurement Spend as a Percentage of Total Cash Outflows

      The next question is, how much can you take out of that 60? Well, a common mistake is to assume that “10% should be possible.” Maybe 10% is possible, but not on the whole 60 of spend, at least not in the medium term, because some spends will be non-addressable or locked in, and there is always a “tail” of specialist one-off suppliers. These non-addressable spends can be significant, so it's safe to assume that maybe 60% of the 60 is addressable in the medium term. If your organization is global, you may also have a collection of very small, remote geographies whose spend may be too small to merit addressing in the medium term, which could reduce the 60% further.

Schematic illustration of the Procurement’s EBIT Impact.

       Figure 1.2 Procurement's EBIT Impact

      The beauty of Procurement is that this opportunity (or your spend) is spread across some 40