Jun 10, 2008
In the public sector the search for cash savinngs and other efficiency gains marches relentlessly on. With the possibility of an economic downturn on the horizon, it looks as if the private sector may be forced to follow suit and seriously review its cost base too. Sadly, this usually means reducing headcount, as people account for about 60 -70% of the totals costs in a service based organisation. It will also mean getting tough with suppliers - well at least some of them!
But - Who are the real creators of cost? Yes, in some cases it is the supplier, particularly the large monopolies and cartel- like providers ( not that they are supposed to exist!). However in many instances cost generation is found inside the buying organisation itself. No, it is not the paperwork and forms - this cost gets passed onto the final end user.
The main sources of cost increase are:
the inability of many organisations to accept a standard product / service, or change its processes and ways so that it can use a standard offering
the absence of internal planning to allow enough time for the initiation of procurement activity and coordination with other organisations to maximise commercial leverage
market conditioning by the supplier
If organsiations invested a fraction of the time and effort in the early stages of the 'upstream' procurement cycle as they do in the later 'downstream' activity (e.g. Invoice processing / checking), they would soon be able to make a difference to their cost base. We can always hope...........