The simplicity of Amazon makes it appealing to businesses. It’s familiar and easy to use. Finding what you want is simple and ordering is reduced to a click of a button. Moreover, the endless choice means that you are never short of suppliers for your goods. That also means that prices are competitive – supply far outstrips demand for most product categories.
2020 was one of the hardest years on record for businesses – and that’s not about to change in 2021. But it’s not all doom and gloom. While the challenges last year posed difficulties that nobody had planned for, this year they’re more a known quantity. Most of the challenges business face this year will be dealing with the fall out of COVID-19 and Brexit. Both will restrict the way organisations operate and in different ways. But with a clear understanding of what each scenario involves, risks can be planned for and mitigated – leaving you in a position to thrive rather than just survive. So what can we expect from 2021?
In any complex system, there are natural trade offs – and that’s certainly true of the supply chain. The ability to move goods on time and on budget is balanced against external forces such as product quality and customer satisfaction – and thus you have the finely poised relationship between efficiency and effectiveness.
The news that a vaccine for COVID-19 could be available in early 2021 brings with it renewed hope that the world may return to normal by the end of the same year. The pandemic has shown us many things, among them that the resourcefulness and resilience of communities – both locally and globally – is alive and well. That’s been especially true in the business world where organisations and their supply chains have proved flexible and adaptable to change.
Most companies know how much they make each year, but how many know what they’re spending? It’s a pretty big question, but it’s one relatively few can answer. It’s a big question, because close to 20% of what a company spends annually goes on indirect goods – the things that keep the company running – and it all adds up.
Building relationships with stakeholders to a point where procurement is seen as a valuable business partner is a long and arduous road. Even with C-Suite directives, the prospect of change can be an obstacle and changing mind-sets can be challenging. Fortunately, the use of internal data analytics and external market intelligence (MI) has changed the way businesses work. It’s also influenced how they go after success and ultimately how that success is defined.
If proof were needed that procurement is the epicentre of modern business, then one need only look at the demands placed upon it. Its evolution has seen it transform from a price-driven, cost centre, to a strategic powerhouse that delivers on everything from corporate and social responsibility to environmental outcomes.
Reliable data is the cornerstone of modern procurement. Clear information informs wider strategy and drives business performance through informed decision-making. Specifically, it is the data organised by spend analytics tools that are a catalyst for elite performance. Those using such platforms report savings of between 5% and 20% a year after engaging the software, gaining competitive advantage from improved process, enhanced supplier performance and consolidating spend. So how can you drive competitive advantage from data?
In a tight and volatile market where margins are fine and challenges are exacting, every competitive advantage needs to be explored. Despite that, few organisations examine their indirect spend with any real intent – which is surprising given that it grows an average of 7% year-on-year and accounts for roughly 20% of an organisation’s procurement spend. At best, such practices are negligent. Even in favourable market conditions, very few organisations can afford to leak that amount of cash and value from their business.
If you know that you need to get more from your Indirect Procurement (IP) but can’t see the wood for the trees, outsourcing all or part of your procurement operations is a great way to go.