Not another media inspired crunch in the making I hear you say. No, this is about one of the many chunks of fall out that is likely to accompany the crunch that has covered every newspaper and TV report in recent weeks. What do I mean? Simple, this could be a defining moment for the purchasing function and to demonstrate its worth to a far wider audience.
For several years I, and a small group of colleagues in across all sectors, have been suggesting that people in purchasing need to up their game on issues such as risk management and market shaping. Market consolidation and changes of ownership are not new, neither is the idea of companies failing. However, what is relatively new is the movement of venture capital and 'innovative' contracting backed by private financial investment into large areas of public front-line services. Social care provision has seen this on a large scale, but then so has waste, construction and outsourcing. It is not for me to comment on whether this policy is right or wrong. But I will point out that lots of this investment has been derived from banks and financial institutions and sooner or later it has to be paid back. Even venture capitalists are not unaccustomed to pulling the plug on companies, their investments, which fail to deliver the necessary returns.
Very few purchasing organisations have got risk management strategies in place, should a major provider fail. Even fewer know the ownership and debt levels / structures etc of their top companies providing front line services. They cannot tell you anything about the market consolidation that is going on and what impact that could have on service levels and costs in the future.
Knowing that someone pays their invoices within 30 days, has a good D&B score or is nice to furry animals won't cut the mustard when an elderly person's home caring for the local authority citizens is suddenly closed. Risk management is on the agenda big time and it has to be the purchasing function using its commercial skills that is proactive in flagging the issue of the potential failure of key suppliers. The audience is waiting, the stage is set - will we get the performance?