Central Procurement Organizations: The Good? The Bad? The Nothing?

Do you know what it feels like trying to find the Truth? Right. Basically, the Truth does not exist. A lot of small truths – yes. And that is the most important: to find Your Truth.

Let’s get back to central procurement organisations. There are a lot of them. Most of them work in FM, MRO, indirects areas. Keywords, which lead to them, are “outsourced service”, “consolidation”, “increased buying leverage”, “reduced administration costs”, some others.

I am a procurement specialist, so I should like it. And in general, I would. You can expect to get the following benefits:

  • Lower prices;
  • Consolidated invoices;
  • Higher level of service;
  • Spend manageability and transparency;
  • Better planning;
  • Clear cost of a function.

However, you should not expect this as granted. A recent example showed, that there are plenty of different scenarios:

  • Dodgy fee structures (yes, more than one different way to charge for the services);
  • High prices due to additional rebates CPO companies are taking from original supplier/manufacturer;
  • Continually decreasing service levels;
  • Duplication of PO entering into the systems – with no purchases consolidation whatsoever (yes, simply re-raising the POs they get from you to the supplier);
  • Unjustified management fees;
  • Broken communications: reporting the good (on time) and ommiting the bad (delays; which, actually, are more important).
  • Inefficiencies: over-staffing and similar.

The situation cannot be black and white. Some might suggest, that only small to small-medium sized companies benefit more from using CPO services, while medium-large companies don’t, as a rule.

All in all – there is no single Truth. My learning was to ask questions:

  • So, the turnover increased. But has PO quantity gone up? Has SKU count increased?
  • How long does it take to raise PO and how many do you raise? How many people does it take to service that? Is there a possibility to automate it?
  • What are the business needs: processes, people, items? Do you have “special” items and “store” items? Which is the biggest part of spend? How many delivery points do you have? Working hours? “Emergencies”?
  • What is the added value that CPO would bring you? Could you achieve it by yourself? I mean, IF you would REALLY try?

And all this reauires – is to stop and think. Challenge the situation. Move a bit out of comfort zone.

Thanks for reading! As always – any questions or feesbacks very welcome!

Advertisements
Central Procurement Organizations: The Good? The Bad? The Nothing?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s