Achieving cost reductions on a single purchase is one success. Continuously reducing costs and driving additional performance improvements over a time period is another matter. This requires a combination of granular market data and the skill sets to understand and decipher how historical market dynamics will affect the future management of procurement.
Consider the buy-sell transaction. Online solutions exist that provide current market intelligence to enable Best Value purchases on a transaction by transaction basis. On a simple level this is based on local conditions and today’s pricing and stock. To truly maximise this technology there needs to be an inherent understanding and intuition in the procurement department to deliver prolonged and planned fiscal gains rather than a reactive approach to buying at current best price, best stock conditions.
Current online solutions are helping to make buyers’ lives easier by aggregating historical and up-to-the-day price and stock data into graphical trends that can be analysed at a glance for swifter purchasing decisions. This means historical trends can be spotted and applied to forecasts for future buying initiatives. The time saved by this type of powerful technology that provides trend analysis functionality across over 100,000 products, can be applied to focussed product and category management. This empowers buyers with time to go even deeper into the dynamics behind price and stock changes for more intelligent forecasting that is a step ahead of the manufacturing and distribution network.
This means there is a greater debate to be held around more complex issues that affect purchase efficiency and a forward view of pricing plus detailed knowledge of the manufacturing supply chain.
Price of a product can be affected by many factors; local and international forces as well as component manufacturers’ supply chains. A simple example is when a major component like a processor in a laptop PC changes price. When does that price change filter through to affect the purchase price of the laptop?
Elements to consider in forming an answer include: manufacturing costs, plant investment, transportation time, customs duty, exchange rates, legislation changes and local stock levels and costs.
In the manufacturing supply chain the Product Management and Marketing Teams will be working to define how they maintain and grow their market share utilising every trick in product life cycle management to maximise their profit margins.
These are the people who control and manage the price of products in the IT Product supply chain. Sales teams and procurement people will agree a buy price at a local level based on the overall strategy defined by product managers and marketing teams. Understanding how product managers in the manufacturing base will change pricing strategy has significant value when forecasting to buy eg. laptops, especially if high volume orders or longer term technology refreshes are planned. But it is key that this type of dynamic is considered when developing a best practice procurement strategy for long term bottom line savings.
With knowledge of when the price is going to change buyers have the option to negotiate a better price or alternatively wait for new pricing to become effective. Buyers need to understand the manufactures supply chain to gain maximum advantage in purchasing efficiency.
If procurement is to be managed efficiently for maximum value then the information required on the purchasing side is the same as that of product manager and marketing groups in the major manufacturers. These operators need the information to understand market dynamics for competitive reasons rather than the best time to buy. But without a basic consideration of the whole supply chain no buyer can hope to maximise procurement efficiency. As a buying entity, the public sector undoubtedly needs great tools that offer up-to-the-day graphical trends and understanding of how to use market intelligence to deliver best practice and sustained purchasing efficiency.
Few outsourced providers have the capability in the marketplace to offer price and stock data updated on a daily basis via an online solution coupled with trend forecasting tools and the impartial knowledge of the dynamics of the marketplace. Procurement solutions like those used by IT reseller Probrand, which it has branded theitindex.co.uk/gov, offers data back to the supply side which goes all the way back through the manufacturing supply chain, which in turn empowers manufacturers with a mechanism to reduce their risks in exchange for more competitive pricing. A win-win.
With superior market intelligence tools buyers can make up their own minds on when and where to purchase, on or off tender. However, for buyers who lack elements of knowledge or do not have the time to ‘market watch’ in order to genuinely second guess market movers for efficient purchasing, perhaps the best route is to employ the combined flexibility of an outsourced team and technology.
Public sector procurement should be commended for its progression so far but there is a need to integrate further developments into its approach. A dynamic shift in adoption of technology has already begun, however, the second step is to use this technology as part of a strategic plan for purchasing efficiency that includes far greater understanding of market place supply chains and how to use their nuances for sustained best value purchasing.