Centralising of procurement functions appears to be a bit of theme today. Our earlier post (http://tinyurl.com/qe8rbj7) looked at the issue from the macro perspective of the UK Government’s ongoing strategy to bring together the diverse strands of central government procurement into a more uniform, coherent and co-ordinated system.
In the linked piece at Digital Energy Journal a case study for the centralisation and rationalisation of the private sector within oil and gas production in terms of buying is set out.
Non-strategic consumables represent a significant component of spend in the industry. Aggregating and co-ordinating that spend to control the buyer position in that market would, it is argued allow for significant savings.
We have, of course, heard all of this before: buying from source cuts out incremental supply chain margins, buying at volume promotes downward pricing pressure, point buying of precise quantity on a “just in time” basis (with a secure source) drives out wastage cost, etc etc.
It seems to be the case that previous approaches to closed loop eprocurement systems have been less than successful. The technology has not been up to it? Actual administrative and process burdens are to much of a drag? Vested interests in supply-chain economics don’t like it? Suppliers want to feel like free operators in “their” own market?
We do sense there is change afoot and it is likely brought into sharper focus by the post recessionary times in which we find ourselves. Most of the “edges” in terms of advantage in the market place have been identified and colonised.
Our recent post highlighting assertions that merely shifting to all-online procurement (a far cry from full supply chain eprocurement) could save up to 3% on procurement budget (http://tinyurl.com/ooovlc8) could save up to 3% against budget suggests that this is potentially fertile ground for cost saving.
Where cost-bases are cut to the bone, even this kind of small incremental improvements could prove to be the next “edge” waiting to be occupied.
We have said it before – it does seem to us that eprocurement in its widest sense is an idea whose time has come…..