During the first half of this year, the joint PA Consulting / CIPS Survey 'Removing The Barriers To Successful Purchasing Initiatives' – which surveyed the experiences of organisations representing £120bn of combined spend – was followed up with analysis, interpretation and confirmation of the results.
More than 50 telephone and face-to-face interviews were conducted and the key finding is that, whilst most organisations have invested heavily in the development of purchasing strategies, processes and information systems, it is the people and organisational issues which are the most significant obstacles to delivering benefits from purchasing initiatives.
The findings in January indicated that, while 98 per cent of purchasing executives are at least fairly satisfied with the results of these initiatives, the consensus was that two-thirds of the benefits had yet to be achieved. This failure represented £10 billion of missed savings in the survey sample alone.
The principal barriers were reported to lie in the recruitment and retention of skilled purchasing staff and in the effective co-ordination of purchasing initiatives across organisational boundaries. This is then reflected in the difficulty of implementing purchasing strategies across the organisation and getting adherence to agreed purchasing processes.
Many of the purchasing initiatives studied have been cyclical, often driven by external forces, with the study participants currently in one of four distinct phases:
- Initiation of a purchasing initiative by external events (for example, new chief executive, merger, acquisition, downturn)
- Purchasing centralisation and price leverage
- Exhaustion of leverage savings, reduction of central resources, and a focus on local requirements
- Diversification of supply, and loss of leverage prior to a new purchasing initiative.
Embedded within this cycle are the initiatives that purchasing directors of major organisations recognise as delivering less than half of the potential benefits. Neither the centralised nor decentralised phases have delivered all of the potential benefits, and in many cases the benefits achieved were not sustained.
Meanwhile, participants report significant resources being consumed in strategy development, process re-engineering and systems implementation.
The study concludes that to deliver and sustain the potential benefits, organisations must focus on the people issues, as other conditions for sustainable improvements usually already exist. The issues are:
- Confirm that the necessary strategy, processes and IT actually exist.
- Remove the people-related barriers to success, such as perceptions and relationships.
- Drive rapid improvement in the necessary competencies and working practices.
- Implement recognition and reward systems to incentivise both achievement and sustainability of benefits.
In most organisations, the investment has already been made. The focus must now be on getting people to use it.
