Immediate Whitehall cuts of £6bn have now been tabled by the new government as the first stage of deficit repair, with savings expected to be made in three areas: reduced public sector recruitment, scrapping IT projects and renegotiating contracts with dozens of Whitehall suppliers.

But swift and rapid savings don’t necessarily need to mean swingeing service cuts, nor should they impact on IT expenditure where there is a swift and highly tangible ROI case.. It’s possible within the space of weeks to achieve contract savings of over 10-20 percent in many areas through well targeted supplier auction events for example, yet many government departments still don’t have a consistent e-auctions policy.

Some of the realised savings from auctions could then be invested in automating public sector buying, ensuring that all spend is on contract and enabling buyers across multiple public sector bodies to collaborate more effectively on purchasing to create a win-win situation of lower prices for buyers and higher volumes for selected suppliers, with process cost savings for both.

Addressing the complexity of purchasing and spending is the real challenge the new government faces but that will not be solved by a slash and slice mentality. There is a proven path to rapid cost savings without bringing valuable long term initiatives to a halt and forcing unnecessary headcount cuts.

Following on from our earlier post – we take a look at the Liberal Democrat Manifesto and how procurement features in their spending cut plans in comparison to the other two main parties.

Government defence projects come under scrutiny by the Liberal Democrats as part of their plans to save £15 billion year-on-year. Nick Clegg pledged to revisit all major spending projects through the strategic spending defence review ensuring that procurement costs were kept low.

 IT procurement projects would also come under scrutiny according to the manifesto with expensive technology options to be reconsidered with alternative approaches including open-source software and cloud computing.

The Liberal Democrats are also keen to adopt policies that would encourage the procurement of green products including fair trade and sustainable products building on their planned investment of green energy, technology, housing and transport.

Post your views on how you think each party’s policies will impact upon procurement and watch this space for our post-election blogs and reactions.

In the run up to what promises to be one of the most closely fought elections, we take a look at how the two main parties factor procurement into proposed spending cuts, tackling the UK deficit and their election policies. 

Conservative Manifesto: Procurement to drive innovation

The Conservative manifesto has declared that the way in which purchasing is managed and conducted will be the key to promoting enterprise and innovation. Some of the details include:

·         A pledge to allocate 25% of government procurement contracts to SME’s by reducing administrative costs relating to bids.

·         All government tender documents over £10,000 will be published on the Supply2gGov website

·         Large ICT contracts will be segmented into smaller contract components providing opportunities for SME’s

·         Visibility of government contracts and projects over £25,000 for purchasing of all goods and services

·         Visibility of all project details that are awarded £25,000 or more of EU funds

·         Reform of the MOD’s procurement processes to reduce running costs by 25%

Labour Manifesto: Procurement to prioritise local people

The UK Labour party has pledged priority to local people from future public procurement, as part of their move to tackle immigration issues. They will also be focusing on government spending and overhauling department structures; some of the details include:

·         Reducing back-office and property running costs

·         Abolishing unnecessary quangos

·         Reducing costs on consultancy, marketing and lower priority spend areas

·         Reforming defence spending by reducing civilian staff , cutting costs  at headquarter offices and reducing consultancy and travel costs

·         Improving efficiency throughout police service procurement

In either case there’s no surprise that procurement and spending feature very strongly in this year’s general election issues.

We’ll be looking at the Liberal Democrat manifesto in upcoming blogs as we approach Election Day on May 6^th.

Automotive manufacturers Renault and Nissan recently announced that they have teamed up with German car maker Daimler on a joint purchasing initiative. By exchanging equity stakes in each organisation, these three automotive leaders have pledged to work together in developing technologies for small and electric cars, light commercial vehicles and next generation models.

In addition to product development plans, this unity of Renault, Nissan and Daimler provides the opportunity to benefit from common purchasing opportunities, share technology costs and gain scale. This collaboration perhaps indicates the need to share (albeit with competitors) in order to strengthen and reposition those organisations that have been the hardest hit during the recession and the automotive industry has undeniably been one of the industry sectors most severely affected.

Other collaborations such as this being common practice in public sector can increasingly be found in the private sector, and observing whether this trend continues once the recession subsides will be interesting - will we continue to see ground-breaking purchasing initiatives that generate joint business advantages or will competitive enmities resume?

In either case we are trying to lay foundations for suppliers and buyers to work more effectively together by investing in technology to support the collaboration between buying groups and supplying groups.

On the day of A-level results, news reports have announced record results have been achieved yet again, with the 27^th year-on-year increase. The scramble for university places begins, and in a few months students will be embarking on their path to graduation and future careers. 

It is interesting to see that although the pivotal role procurement plays within many organisations has clearly been recognised amid such gloomy economic times, that a procurement career is perhaps not at the forefront of many higher education students' and graduates’ minds.  

Steps to promote a career in procurement are being taken with the introduction of the Government Procurement Graduate Scheme (GPGS) and some private sector organisations are promoting relevant supply-chain graduate programmes and procurement recruitment drives, clearly marking out the path towards CIPS qualifications, which is promising to see.  

Let’s hope that graduate talent will continue to enter the procurement profession and that their career path to get there becomes a little clearer to see.

High-street retailers are realising the effects of the recession with damaging levels of consumer spending, and spend-savvy consumers choosing online shopping to save time and hunt out a bargain. With online spending forecasted to rise by 13.3% during 2009* to a substantial £20.9 billion, consumer choice and in turn competition between online retailers is increasing.  

Online spending is also predicted to reach £31.2 billion by 2013* accounting for 10% of all retail spend, which means more and more leading high-street retailers are turning their attention online. The competition is hotting up with free delivery and keen pricing at the fore to attract and retain those savvy shoppers.  

With this e-retailers are facing tough competition from the high street’s purchasing power and leading brands, making those investments into efficient purchasing all the more crucial. 

*according to the Verdict research UK e-Retail 2009 report

The MP expenses scandal has caused outrage and disbelief through the nation, with extravagant claims including refurbishing second homes, purchasing cinema systems and maintenance of moats coming to light.  

The battle to obtain these expense details by freedom for Information campaigners has demonstrated to what level expense claims can be taken to, if appropriate checks are not made; although these are somewhat extreme in comparison to most organisation expenses.  

It does still raise the question of how visible expense claims are in your organisation and what controls and measures are in place for the expense allowances of your employees.  

As seen in the MP scandal, not every employee will make fraudulent claims or take maximum advantage of expense allowances, but by introducing or refining your expense management systems and procedures will achieve control and transparency before you have a scandal on your hands.

If 90% of an organisation’s customer base said they found dealing with elements of the business difficult, it’s hard to imagine a turnaround that could pull back customer confidence from such low ebbs, but this is exactly the challenge currently facing SAP after a recent survey by Macro 4 discovered that 90% of SAP software users considered IT upgrades a “challenge”.

The main concerns relate to time, complexity and resources; so the same old story for ERP customers everywhere. With support ending in 2010 for older versions of SAP, however, businesses are left with scant choice – except in the scope of the upgrade they select. Which is why we are seeing so many organisations concentrating their SAP upgrades on core system elements, and looking to best-of-breed providers to deliver the peripherals, such as procurement.

On-demand systems that fit seamlessly alongside the core SAP financials deliver more quickly, cleanly, cost-effectively and above all intuitively from an end-user perspective. So whilst a couple of years ago many organisations simply said we’ll have it because it’s SAP, in an uncertain economic environment it simply no longer makes sense.

Speaking to Supply Management.com recently, LG announced their aim to be “the best procurement organisation in the world” over the next 3 years – a bullish statement, but one they certainly appear to be backing with investment into their procurement personnel.

The business is creating a buyer bootcamp for procurement training, with the aim of helping LG realise its goals for savings of up to 20% in general procurement, representing a reduction of £1.4 billion in indirect spend alone. Huge resources – and consequently huge savings potential make this kind of programme possible for the Korean giant, but what hope for the majority of organisations which don’t have the capacity to invest into such an exercise?

Fortunately there is a wealth of information available from sources including the Chartered Institute of Purchasing and Supply, or by looking at best-practice guidance through technology. Many source-to-pay system vendors also offer consultancy services, seminar sessions, webinars and round table discussions on industry relevant subjects.

Information and guidance from a wider range of sources also ensures subjects are topical, relevant and selected dependant upon current demands, time and personnel. And all without the blood, sweat and tears of boot camp!

The first five episodes of The Apprentice have seen success-hungry hopefuls predictably fail during their tasks and under boardroom scrutiny. Yet what stood out in 3 out of the 5 tasks were the spend management failings of such supposedly business-savvy individuals.

During episode 1 Anita Shah was given the role of controlling the Girls team spend, and came under serious fire from Sir Alan after she congratulated the team for coming under-budget when purchasing their cleaning supplies, yet didn't question the necessity to spend the majority of the budget. In episode 4 Paula’s team confused the cost of sandalwood and cedarwood oils, leaving the team shocked to find out they had spent £700 not the £5 that they originally thought! Regardless of the fantastic beauty products they managed to produce and doubling their prices to compensate, this mistake left them with a deficit.  

Lack of spend management and control can impact upon profit as any procurement professional knows. Let’s just hope the remaining candidates’ cotton on that unless the team leader is in control of their team and its spending they’ll be heading out the boardroom door.