Why Procurement Strategies often fail to deliver the promised benefits

Pi has been analyzing SA corporate spend data for over 12 years. Admirable initiatives such as strategic sourcing and category management are often still-born or short-lived, or attempted in recurring waves over the years by new procurement teams.

There is a need to constantly sell the benefits to the business operations and monitor the ongoing evidence that the strategies are actually being implemented. This is a repetitive but necessary process. A simple but good example of this would be looking at the various dimensions of contract cover over time on the basis that contracts tend to reflect strategic sourcing initiatives. Analyzing maverick spend may demonstrate poor procurement behaviour (more often than not in the business operations) or insufficient contract cover. It allows the procurement team, in conjunction with their internal customers, to take the necessary corrective action based on empiric evidence. Here is an example of spend by various cost centre managers where most of Mr Stork's spend with Komatsu was coded but off-contract.

This analysis formed the basis of a discussion with the cost centre to make sure that the contract was relevant to Mr Stork's requirements and enabled a cost saving on the items purchased under the contracts.

We shall be publishing a series of short articles on examples of spend analysis and its vital role in helping to deliver ongoing procurement cost savings and efficiencies.