A sure way to EBITDA betterment

At Procserve we unashamedly pursue the betterment of EBITDA for our customers through procurement savings in both cost and efficiency that comes from implementing our eMarketplace, the Procserve Commerce Network.

The audience for this message are the CPOs of organisations large and small who, for the first half of 2014 at least, have in the main been too busy to hear it!

As Chief Commercial Officer for a software company I fully understand the pressures of the day job, but if someone told me they could improve my company’s EBITDA by 10% and only ask me to invest the equivalent of 10% of those savings in order to get it, I would proverbially bite their hand off and have no choice but to listen to their proposition.

On average every pound saved is the same as £16 of revenue generation†, so we think it’s worth putting in a little effort to make those savings! Procserve understand that this effort needs to come from both you and us; that’s why we commissioned BDO LLP†† to validate the savings we make for our customers. Furthermore, we offer our clients one of our top Procurement Consultants for half a day to further validate those savings within your organisation and map them directly to the improvement of your EBITDA. We do this for free and with no obligation.

So if you can spare 1 hour of your time, be willing to share some basic data markers about your spend and existing procurement processes, we will show you just how well we invest that hour and how you could improve your EBITDA by 10%.

†IBM Procurement: Optimizing savings and mitigating risk in a complex world
††BDO International is the fifth-largest accountancy firm in the world

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Feeding the Bottom Line in Food and Drink Manufacturing Through More Efficient eProcurement

Over the last couple of years, one industry has received more negative press than others: the food and drink manufacturing industry. A recent study1 suggests that just 7 in 10 people have confidence in food safety now compared with 9 in 10 before the horsemeat scandal.

As manufacturers begin to tighten up quality control processes and increase their spending on achieving compliance with various legislation madates, margins have never been tighter. A study by BDO2 noted that margins within the industry are being placed under greater pressure each week with 83% of food manufacturers experiencing similar or worsened operating margins in comparison to 2012.

So what can food and drink manufacturers do? What actions can they take? The only way to compete is to be cheaper or be different, right? And this requires investment.

 

1 Which?, Future of Food Report, 2013
2 BDO, Food and Drink Report, 2014

Is an eMarketplace Innovative?

Whether you want to buy office supplies, IT hardware, travel, Social Care, Consultancy services or even retail or manufacturing goods for resale, an electronic marketplace has been created and implemented in one guise or another in most developed countries for nearly 20 years.  And yet, the throughput of spend on these marketplaces still only accounts for less than 27%. Why is this?

The business benefits are clear enough; total control over contracted spend, automation of the entire requisition to pay process, reductions in the cost of procurement by a minimum of 10%ᵻᵻ and total visibility of all spend in real time at the push of a button!  Add to this that corporate requisitioners are more used to buying online at home than ever before (record online sales in 2013 of 10.35%ᵻᵻᵻ– see image below) so it then occurs to me that there has to be something fundamental at work here in the UK.

In some countries, where compliance is a social given, the thought of not following a ‘rule’ would be inconceivable, whereas in others adherence to a procurement process would simply be mandated and anyone not falling in line would be dismissed; but here in the UK, ‘rules are there to be broken’, ‘who are you to tell me I cannot buy from the supplier I’ve always used?’, ‘who says it’s better for the company, I don’t care about that!’ ‘Rules! I’ll find a way round them’…… it’s almost a challenge which needs to be overcome!

One place this may be different is in the Manufacturing space, where process and efficiency reigns supreme. ‘If there’s a better way of doing something; more efficient, slicker than before, then it’s my job to make sure I find it, follow it and do the best I can.’ But even then this usually only happens on the production line or factory floor in the ‘goods for resale’ side of procurement.

eMarketplaces have not really changed over the last decade, so we can no longer call them innovative.  Apart from the addition of electronic payments which means they are available to a much wider number of organisations, with less integration required than ever before, they are fundamentally the same.

It may be that the process automation benefits of implementing an eMarketplace brings with it the inevitable removal of effort involved in that process and the potential for redundancies in the Procurement and Accounts Payable teams.  Invariably these teams are involved in the adoption process and obviously tend to be resistant; no wonder the only people who are remotely interested in the value of an eMarketplace are CPOs or CFOs.

However, the business transformation tends to be too hard for a CPO to want to consider and definitely not as sexy as ‘doing the next great deal’. But the benefits from that deal will never be realised in an indirect category unless the implementation of the deal is addressed.

Therefore if the UK wishes to take advantage of the benefits offered by an eMarketplace, the transformational change required to adopt it into the business-as-usual psyche of the British workforce must be taken seriously and implemented in conjunction with a mandate, whether hard or soft, to avoid being sorely disappointed when the potential benefits of those valuable procurement contracts are not realised.

ᵻ – Aberdean Group, Supplier Networks v2.0, April 2012
ᵻᵻ – BDO LLP analysis of Procserve eMarketplace value 2013
ᵻᵻᵻ – Office of National Statistics data