The higher education sector is the latest to face government announcements of budget cuts, with Lord Mandelson recently proposing further cuts of £135 million, taking the total up to nearly £400 million during  2010-11. This has raised many concerns both inside and outside the industry as to how this will affect spending on a per student basis, capital purchases and intake numbers.

It’s fair to say reducing costs is high on the agenda for many universities and higher education organisations, although here at Wax we have already seen the shift change in traditional procurement methods and technology requirements within the HE sector..

One university ahead in terms of assessing and reducing costs across the organisation is a client we’ve been working with for some time who through the use of source-to-pay technology is reaping the benefits ahead of the proposed budget cuts.

With savings in excess of £400,000 from just two eAuction events for facilities management and uniform contracts and the technology to cement the savings generated in these and other areas such as IT and Stationery this leading UK University now have the tools, technology and know-how to deliver future significant savings and beat the budget cuts.

Find out more about how we have helped cut costs in key higher education categories through effective eSourcing.

Aldi and some of the other leading discounters swept the board at this year’s annual The Grocer Gold Awards. Winning the ‘Grocer of the year’ Aldi gained the highest accolade of the evening and with the inclusion of a new ‘Discounter of the year’ award it demonstrates just how much discounters are prevailing during the recession.  

Although Aldi and their peers have slowly been gaining market share over the years, the current economic climate has led to changes in consumer spending habits, with increasing numbers of shoppers heading through their doors.

It has been commented that once the recession lifts, shoppers will not necessarily be flock straight back to the leading supermarkets. Once realising the benefit of sourcing alternatives that live up to standards and price expectations, there will be a number of shoppers who will stay loyal to Aldi and co. 

The same trend could therefore be realised within the procurement industry whereby procurement teams have currently been tasked with contract renegotiations, sourcing alternative suppliers and reducing costs. What’s to say that this practice has to end once the economy starts to lift?

According to reports from The Times and a Panorama feature earlier this year Reverse auctions are leading to the demise of health care services for the elderly. Gathering few examples, not speaking to a procurement specialist and taking the viewpoints from suppliers who lost out in the auction may have somewhat led to a one-sided view, but it does highlight a serious issue.

In our experience the quality and standards required by an organisation from their suppliers, should not and does not suffer if managed correctly during an RFI/P and auction process.  

The information gathered relating to highly sensitive issues of quality standards, minimum requirements, health & safety and legality should all be addressed before the auction even takes place, and only those suppliers who meet a highly detailed and watertight specification will then proceed onto the auction itself where yes price does become the focus.  

Working with organisations such as Network Rail and a leading healthcare organisation (who recently ran a reverse auction for care home services) where these issues are critical, means that we work with our clients to ensure their specification is accurate and meets their business requirements.  

It is not the tool that is at fault (according to the Times) but how the specifications are managed, the support and experience available and how it is communicated to those involved.

Cypress Semiconductor Corporation made an astonishing statement last month, which has had procurement professionals and commentators debating and scratching their heads about it ever since. Here’s a sample of their press release:

“The Company will not participate in any reverse auctions, including sealed-bid or iterative-bid varieties. Furthermore, the policy precludes participation in procurement programs or tactics that eliminate straightforward negotiations. The reverse-auction process has numerous drawbacks. It does not allow bidders to realise the full value of their solutions, instead focusing solely on the lowest price as a differentiator”.

There are some that will agree with Cypress and undoubtedly such a global statement causes concerns that if other suppliers follow suit this will throw a shadow of doubt across the eauction process.

Cypress has however come under fire at their alleged “short-sightedness”” and that they may live to regret issuing such a hard-hitting statement. After all price is not the only element to reverse auctions, and the lowest bid doesn’t of course always win. It comes down to having clear business specifications including a variety of elements such as quality, delivery and terms which can be established in the RFI/RFP stages; and then weighing this up against best value. 

Eauctions form part of an overall sourcing strategy, and when planned and implemented correctly, provide opportunities and prove effective on both sides of the fence. Let’s just see whether anyone else echoes Cypress’s opinion before any real industry concerns can be founded, or if indeed they contradict their own statement in the future!

Ethical and CSR policies are almost a standard requirement when selecting partners, suppliers and even customers. Yet how many organisations can truly say that all practices adhere to these policies? Especially when operations fall to an external company.  

IKEA came under scrutiny recently when ethical standards group The Future is in our Hands (FIOH) discovered poor health and safety conditions at one of their suppliers’ sites. The Turkish-based textile vendor had already been investigated by IKEA and a third-party auditor, where no evidence of safety violations had previously been found. 

IKEA have of course responded quickly and will be looking into these claims further, but it is unfortunate timing for the Swedish-based furniture giant who recently made public statements about positive ethical sourcing, having joined the Global Social Compliance Programme which aims to tackle labour standard issues throughout the supply chain. 

Although purchase-to-pay systems provide levels of control, a commitment toward ethical practices requires the ‘buy-in’ of everyone in the organisation to support such policies. 

IKEA’s plight does go to show that when making such ethical claims, having the controls and measures in place to validate them along with knowledge of and confidence in your supply chain is essential; or those ethical policies won’t be worth the recycled paper they’re written on.

Last week, Oracle has announced their move into selling Saas sourcing products, a move long overdue according to many.  

Surprisingly however, their multi-tenant product is being supported by e-three which raises some question as to who is providing the real service here? And what is their commitment? Surely if this is part of Oracle’s portfolio strategy shouldn’t further investment be made?  

As a best-of-breed provider we can confidently support both sourcing consultancy and technology-based requirements, providing just one point of contact for our customer base. Nothing is outsourced and our investment and commitment is long-term. Oracle may now have a Saas badge, but should they really wear it?

 The last week has seen a lot of coverage in various purchasing media about the merits of sourcing within the UK. It may be that the weak sterling has forced a few hands, but it is good news for the UK economy when leading organisations are now considering UK suppliers ahead of overseas competitors. 

Ernst and Young’s ‘Opportunity in adversity, responding to the crisis’ study has shown that a percentage of global companies are broadening their supplier base to compensate for any supplier failures, whereas many others have reduced their supplier numbers to obtain better deals. Whichever the strategy it would seem that sourcing locally is being considered as a somewhat safer option in the current climate.

Could I get a better deal on my mobile phone contract? Can I get the same quality car tyres somewhere cheaper? The credit crunch has caused many of us to review our own spending, contracts and the habitual purchases we make. 

How many people, for example discover at the end of a contract period that an offer is immediately on the table with a better price or rates? If these rates are available why are they not offered as standard? Well if you don’t ask, you don’t get is the simple answer. New custom generally receives better offers as we all know.  

Unfortunately this applies to the world of supply chain management too. A number of our customers who up until recently didn’t believe they could find a better price or supplier to a core element to their business, were shocked to find out how much money was to be saved through proactive sourcing and negotiation using an eAuction tool, which didn’t exclude their existing suppliers either!  

In the case of suppliers, once a relationship is established and trust has built up, it is all too easy to accept incremental price increases year on year without just explanation or, often, cause.  

It’s a buyer’s market – take the opportunity to ask.

In a recent piece of frenzied hype, online energy specialist supplierswitch.com has stoked business fears with a prediction that the average rate of increase in energy prices for corporate users could be between 60% and 100% year-on-year.

Whilst this might be a little alarmist, there’s no denying the impact of energy price rises on even the largest operators, with Tesco recently revealing that the financial gains provided by its 8 year programme of green energy initiatives have been wiped out by soaring gas and electricity prices.

And considering that energy and telecommunications costs can make up as much as 25 percent of an organisation's overall operating budget, it’s well worth paying close attention to utility costs. The good news – a commodity in somewhat short supply these days – is that energy remains one of the most responsive spend categories to effective sourcing.

CSR, or corporate social responsibility, programmes play a key part in the supplier qualification work we do with our clients, either as part of our consultancy offering or through use of our electronic sourcing tools for the delivery of pre-qualification questionnaires that automatically rank and score supplier repsonses on elements including CSR metrics.

And if suppliers didn't think large organisations really took this stuff seriously, then the last couple of weeks will have disabused them of that notion, with two of the biggest brands on the high street getting into a pickle and causing a stir respectively.

“Even during this time of change for our company, one thing that will never change is our long-standing commitment to conducting business in a responsible and ethical manner,” Starbucks’ chairman, president and CEO, Howard Schultz, said in a letter to stakeholders.