Companies burn money while buying

Despite a continuing focus upon cutting costs many companies could become far more effective at purchasing. According to Professor Colin Coulson-Thomas, who led the effective purchasing project which examined buying across Europe: “Flabby buying can drain a company’s coffers and impair its performance. Companies need to be entrepreneurial when buying from suppliers as well as entrepreneurial when generating revenues from customers.”

A team, led by Coulson-Thomas, examined buying across Europe. The findings, summarised in the report ‘Effective Purchasing, the critical success factors’, suggest many companies could ‘buy smarter’. According to Coulson-Thomas: “All companies reported their purchasing achievements were falling short of their aspirations. Clearly more effective purchasing can have a very significant impact upon the bottom line.” He describes the ‘winners’, the companies that secure the benefits of effective purchasing: “Winners work with their suppliers to reduce costs, innovate, and improve quality or speed up deliveries. Involving purchasing and preferred suppliers earlier in the new product development process can often reduce the time required to bring new products to market by a quarter or more.” The Professor also finds: “Winners are more likely to build longer-term and partnering relationships with strategic suppliers, and integrate purchasing into group strategy. They recognize building value can be as important as controlling costs, and working with suppliers can lead to more competitive offerings that benefit both parties.”

Coulson-Thomas explains: “Squeeze suppliers too hard and they may lack the margins needed to fund investments that would enable them to stay at the top of their game. Collaboration to find new ways of working together can lead to opportunities to save both sales costs for the supplier and purchasing costs for the customer.”

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Winners prefer longer-term contracts with reviews, and framework contracts with local call-offs. They build collaborative relationships with a smaller number of strategic suppliers, monitor quality, and are better at using IT and e-business technologies to support buying. When assessing suppliers, they look for a willingness to enter into a partnership, flexibility and senior management commitment.

Coulson-Thomas believes: “You need to understand where you are in relation to the differing approaches of winners and losers.” The ‘effective purchasing’ database has been constructed to allow companies to benchmark their approaches against their peers and the winners who derive most benefits from their purchasing. A 15 page bespoke report that is also available separately that covers 137 purchasing issues and enables those who complete a questionnaire to identify the areas they most need to improve.

Based on in-depth research covering the purchasing functions and activities of 296 European companies, this 175 page A4 report can be used to review your organisation’s purchasing strategy and practice, brief your top management team on purchasing issues, assess where you stand in relation to approaches adopted in other countries and identify opportunities to derive more value from your purchasing function. Nine policy issues are examined in depth, including relationships with suppliers, outsourcing and ways of measuring purchasing performance. The report contains 79 diagrams, country statistics and checklists of key action points to help ensure your organisation’s corporate purchasing contributes to the bottom line and enhances competitiveness.

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Table of Contents:

• The research team
• Foreword
• Introduction: how we carried out the research
• Executive summary
• Winning benefits from purchasing
• How purchasing is organised
• The treatment of purchasing
• Relationships with suppliers
• Purchasing and information technology
• Outsourcing purchasing
• Measuring purchasing performance
• International purchasing
• Purchasing in the future
• Statistical summary and country statistics
• Further reading