Teamwork to overcome Olympic-sized procurement hurdles

With less than 150 days until the Olympic Games, some interesting procurement challenges have come to light.

We’re not talking about a shortage sand for the beach volleyball, chlorine for the swimming pools, chalk for the weightlifting or drug-testing kits.

It’s things like the number of security guards needed … by lots of organisations, all at once. Up to 20,000 more may be required when the Games start, according to reports. And this begs the question – will a sudden surge in demand of that magnitude have a knock-on affect on the market?

And (whisper it), elsewhere there’s also a rumour about a shortage of … portable toilets.

Only time will tell over whether there’s enough of everything to go round. But what’s really commendable is the approach being taken by key organisations affected by the games. As the Cross Programme Procurement Group (CPPG), they’ve teamed up to manage risk and get value for money.

Of course, the Olympic Games is a special case with unique pressures and immovable dates.

But in the wider economy, day-to-day collaboration among regional public bodies, special interest groups and business units can reap major benefits too.

Through joint marketplaces with the same purchase-to-pay (P2P) system, they can share and access larger open contracts that benefit from high-volume pricing – and make effective strategic decisions together. It’s happening across the UK already with great success.

Is there a Plan B?

How many of your suppliers will go under this year? And do you have too many eggs in one basket?

It’s a sobering thought. But information specialist Experian recently revealed that insolvency rates rose in 2011 – and issued a warning that organisations should address their exposure to any risks.

Over 21,000 businesses failed in the UK. Among the country’s largest sectors, the property industry saw a big increase in its insolvency rate, from 0.72 per cent in 2010 to 0.91 per cent in 2011, during which over 1,300 companies failed.

But firms with one or two employees saw the biggest increase in the insolvency rate during 2011 – from 0.63 per cent in 2010 to 0.71 per cent.

The news prompted a warning – of special interest to procurement chiefs. Max Firth, UK Managing Director for Experian’s Business Information Services division, advised businesses to “understand the risks they are exposed to and have strategies in place to protect themselves.”

The Spend Management Guru echoes this advice – and believes that having the right purchase-to-pay (P2P) system in place can help organisations to meet this challenge.

Firstly, prevention is better than cure. Often, buying organisations become aware that a supplier is experiencing financial difficulties. This may be through their own finance team doing credit checks. Alternatively, it could be through problems with service levels, word of mouth or via another channel.

Should this happen, then a P2P system worth its salt will allow a particular supplier to be ‘flagged’ and a workflow created that immediately indicates exactly what business is going in their direction – and a clear picture of the level of risk. Alternative suppliers can then be lined up as necessary during any ‘flagged’ period.

The right P2P should also allow for searches via an electronic marketplace for possible alternative suppliers. Public sector organisations may also have the added option of national contracts open to them.

Sealed with a loving … invoice

If your partner made you coffee and toast at breakfast-time – and presented you with a bill for £2.50, how would you feel?

Financial independence among couples isn’t so odd nowadays. Around 28% of couples prefer to keep totally separate financial arrangements, according to research.

But news came this week of one married couple in Australia who pushed things a little further.

Apparently, they got into the habit of billing each other for trifling amounts – as little as 50 cents. One invoice was for a $1.60 light-bulb during their 20-year marriage. (NB: We can only hope they used electronic invoicing to avoid a paper storm.)

But the couple’s curious relationship entered choppy water over a boat, according to reports. In fact, magistrates are now being asked to decide whether the wife should contribute to the custom-made $600,000 yacht the husband had built to sail around Europe. It’s claimed that the wife had no interest in sailing whatsoever.

Interestingly, over the years, the wife's assets increased to nearly $4 million while the husband's assets shrank to $315,000, say reports. Perhaps one of them was better at invoicing? We can only speculate.

But however amusing the story, you’ve got to admire their attention to detail. Perhaps they could tell you how many light-bulbs were purchased over their 20 years? And, armed with that information, perhaps they could have bought in bulk from a single supplier and got a better deal for themselves?

The point is this: Potential savings are often locked away in the detail.

In the wider world, finance systems that simply use budget codes for purchasing are often unable to drill down into the detail – and separate items into clearly-defined categories. They cannot see how much is actually spent on product type A or B because the boundaries are blurred.

This contrasts with organisations with purchase-to-pay (P2P) systems that use the United Nations Standard Products and Services Code (UNSPSC). Armed with specific spend information linked to codes, these organisations can target particular categories and negotiate contracts with suppliers, often saving a fortune in the process.

The benefits of UNSPSC magnify when others are involved. This may be through collaboration and shared services in the public sector – or through affiliated companies and business divisions in the private sector. Each financial unit may have its own unique budget code system, but UNSPSC brings uniformity so everyone can see the big picture on spending – and make even greater savings.

High-fives for Kazakhstan

Borat, the creation of comedian Sacha Baron Cohen, did little to endear himself to the Republic of Kazakhstan or do much to project the image of a forward-looking country.

But the Kazakhstan government is making a name for itself – for all the right reasons.

The country’s tax bosses have announced that Kazakhstan is to switch to electronic invoicing from July 2012, say reports. National companies will begin the switch-over - with others following from next January.

And the change will be radical. It’s estimated that Kazakh companies issue 56 million invoices annually. But, apparently, these are all on paper. Not only will the move electronic invoicing save money but it’ll make documents easier to trace.

How green do you want your supply chain to be?

Today’s tougher economic conditions, cost reduction and ways to enhance productivity may be dominating the boardroom agenda. But environmental issues are still in sharp focus.

Take car maker Honda for instance.

According to news reports, the company has faced numerous procurement challenges, from last year's earthquake and tsunami in Japan to flooding in Thailand. Now Honda is powering ahead to make its procurement operations greener and improving the sustainability of its supply chain.

There’s momentum behind environmental issues here in the UK too. Around 90 business organisations are backing next month’s Climate Week, Councils, charities and cultural groups are involved too.

Meanwhile, small businesses are being warned that they could lose out on profitable contracts if they cannot fit into a green supply chain.

But would your organisation be more attracted to suppliers because their green credentials … rather than price alone? And do you have any way of making it happen easily – for instance, by comparing two identically-priced products but knowing which is greener?

If you’re interested in exploring the possibilities, then contact EGS.

How important is it … that your suppliers are local?

When procuring goods and services, price comparison is essential. But it may not be everything – to every buying organisation.

Take the Indian government for instance. According to web site Purcon, the furniture giant IKEA is holding off on plans to enter India’s burgeoning retail market because of the country’s procurement policy.

The site says that when India recently allowed foreign companies to have full ownership of stores selling a single brand – there was a condition. Single-brand stores must source 30% of their materials from local firms.

There’s an obvious logic at work. The Indian government wants local businesses to share in the success of overseas-based firms. A potential win/win.

Back in the UK, local/regional public sector organisations may feel a desire to support their local economies at one level or another.

Businesses may also be more inclined to ‘think local’. On one hand, they need to cut costs in the current economic climate but, on the other, there’s the company brand and reputation to think about. Should ‘social responsibility’ extend beyond global environmental concerns to supporting local businesses? After all, many companies already support local schools, hospitals and other good causes.

But favouritism with contracts can equal unfair competition – and fall foul of legislation.

So perhaps the onus is on local suppliers?

They need to prove why being local is of value. When responding to tenders, perhaps their close proximity or local knowledge may result in a better service? They may also team up with national organisations, adding value by being local. Points like these could make a more compelling submission.

That way, buying organisations could be justified in choosing a local submission over any other – but only if strong business reasons make this possible.

NB: If buying organisations have the right e-procurement system, then local, regional and national suppliers of all shapes and sizes can offer their goods and services on a level playing field.

EGS ‘athletes’ get a great run for the money

If you didn’t get a ticket for the Olympics, never mind. It’s the taking part that matters most … especially if there’s money raised a good cause.

EGS’s super-fit … or rather, super-enthusiastic … team of runners put their best feet forward in the Hyde Park Jog to raise funds for the British Heart Foundation (BHF).

As well as clocking up the kilometres, we’ve also been collecting donations and sponsorship for this excellent cause. EGS is also kindly offering to double what we raise as a team.

Once the aches and pains wear off, we may even be at it again! No promises yet. But the BHF are lining up a season of runs and jogs across the country for anyone wanting to take part. What a great idea.