The watchword in procurement for many years has been “savings”, and increasingly companies are looking past this to greater effectiveness. This priority has increased pressure on both the marketing and procurement functions, and certainly on how they work together.
It’s clear that in many large organisations, procurement and marketing have been able to show substantial costs and efficiency improvements. Examples of the types of saving include supplier consolidation, contract review and implementation as well as supplier management and the introduction of tighter KPIs and SLAs. Despite these gains and the increase in profile of procurement, a recent study by Charterhouse shows that Europe’s top 500 businesses are missing savings opportunities worth over €700 million.
Procurement are now finding themselves in the position, now that they have finished their core work, that any further cost cutting may actually impact on marketing performance. Clearly this is not a result that is acceptable and procurement is treading a fine line between assisting and disrupting. This balance is important, as overstepping will lead to a deteriorating the relationship between procurement and marketing.
Innovation and wasted spend, the new procurement beachhead
Procurement faces the challenge that for it to make an ongoing impact it needs to develop new and innovative ways to engage their internal marketing clients. We can see, and are working with a range of clients to bring this new relationship to the fore, by helping them understand their spend profile better and showing them areas where they can reduce the spend, but not the effect of the spend.
For many companies this “wasted” spend is one of the areas where procurement can make a significant impact. Instead of looking at areas where only marginal gains (three or four percent) can be achieved, their time can be better spent working with marketing looking at areas that are under performing.
This challenge is one of the new beachheads that procurement is now tackling, helping their marketing colleagues to deliver significantly more for the same amount of money. With the right set of tools it is possible to engage, analyse, map and deliver more for less.