Let’s take an educated guess….
How much do organisations typically spend on goods and services from external suppliers?
It obviously does depend on the industry involved, but our experience and research in the healthcare industry shows it is a relatively significant proportion: 30% - 40% of total company expenditure.
Why is this so important to understand, especially now?
Because now more than ever, effective cost optimisation strategies are completely critical to ongoing financial success for any organisation or business.
“To be prepared is half the victory” – as a famous Spaniard, Miguel Cervantes, once said back in the 16th century. Fast forward to 2020, this has not changed.
A sure-fire way to prepare you and your organisation for any cost increases – expected or unforeseen – in order to not only survive, but thrive during this period of disruption, is to invest in your procurement and supply chain capabilities.
For example, I always recommend a structured approach as follows:
Analysis of Spend - Review spend by category and review current contracts to identify where the opportunities lie. Tip: Challenge the norm.
Plan - Develop a procurement initiative plan, whereby you prioritise opportunities by value and complexity.
Engagement - Seek support to implement and realise the identified opportunities as quickly as possible via effective stakeholder engagement.
Governance - have the right governance over each procurement project, with an agreed clear end-user engagement model. This is critical to ensure you can influence and drive change within the business.
Develop and empower your procurement function to be take responsibility of your external expenses.
Set them the challenge to optimise your cost base and so that your organisation can more than weather the revenue challenges of the immediate future.
Posted by Darren Clarke