With a majority of CEOs viewing cost-reduction initiatives as a top priority in 2020, there is a growing trend in organizations to scrutinize expenditures more closely by outsourcing to procurement solutions providers as a way to better manage costs and expenses.
And no wonder — some estimate that most companies waste as much as 30% of their expenditures. These expenditures are deemed wasteful because they fail to impact customers. At the same time, it is vital that companies have appropriate systems in place and cut the right costs through strategic reductions that don’t impede their ability to grow and remain competitive.
Businesses without good systems are, in the end, not sustainable. Therefore, strategic procurement is one of the most effective ways to positively impact a company’s bottom line, but many businesses lack the resources and expertise to optimize their procurement capabilities.
As a result, companies without current dedicated procurement resources, or that have a minimal amount of internal category expertise, may remain loyal to suppliers year after year without objectively assessing costs and end up paying higher prices than necessary.
While a group purchasing organization (GPO) can be useful in helping companies realize savings through economies of scale and supplier management, GPO’s provide very limited services.
New procurement solutions models go much further, offering options ranging from fractional resources that are applied based on an organization’s budget and resources, to serving as an organization’s long-term procurement partner by helping with sourcing, request-for-proposal documents, contract management, auditing services, negotiating with suppliers and more.
These services pay for themselves and provide quick, measurable wins. Based on my experience, a typical return on investment is around 300% when comparing savings to the costs.