Plug in and save: On-Demand savings for Mid-Tier Organisations
How mid-tier organisations are addressing problem areas of spend
With an ever-changing landscape of uncertainty in the build up to Brexit, organisations are having their resources stretched trying to work out which area of the business needs addressing first.
Growth, projects, absence, recruitment challenges and stretch targets cause challenges in managing resource, expertise and delivery, and the traditional approach of hiring interims to fill the gap just takes on fixed cost rather than a delivery outcome.
Whereas the large corporates tend to have extensive procurement teams to pick up the slack, mid-tier organisations and ‘large small organisations’ often don’t have the internal resource to target specific problem areas, with buying power often dispersed around the business.
What have the mid-tier organisations been doing?
There has been a growing trend in mid-tier organisations bringing in third parties to tackle specific categories as part of an ‘On Demand’ procurement service. For example, a food manufacturer and leading supplier to two of the UK’s largest supermarkets has recently brought in support to tackle their rising packaging costs.
With Brexit looming, they are feeling the pressure of a rising cost base, including living wage increases and migrant labour challenges. They know that growing aspect of their business very well, so with ‘plug in’ support they can focus on what they know, and consultants can focus on one or two specific areas to relieve that pressure.
Similarly, a manufacturer and wholesaler with high spend in courier services has used on-demand procurement to tackle that category whilst they focus on their goods for resale. On top of this, they have put the rest of their indirect spend through group purchasing frameworks as a simple solution to providing 15% reduction in their business overheads.
Finally, a law firm with a debt collection arm spends a small fortune every year on postage. With on-demand support to address their postage and franking spend, they have achieved a 30% saving within 4 weeks. This is through market research, finding new and innovative suppliers in the space, and challenging internal mindsets.
How does it work and what are the benefits?
|Hire an Interim... OR...||Procura ON-DEMAND|
|Fixed-term||Agreed scope deliverable and time|
|Pay for elapsed time||Pay only for time required|
|High day rate||Lower day rate plus incentive bonus|
|Min contract commitment - impossible to exit||No commitment - turn on and off as needed|
|Focussed on maximising days used and contract extension||Focused on agreed deliverables and client satisfaction|
|Require performance management||Self-managed|
|Often negative ROI||High ROI|
The set-up process is very straight forward too. Simply agree the scope of the work, agree commercials, and then plug in the delivery team.
There are countless benefits, as highlighted above, but perhaps the one that doesn’t get mentioned as much is the discovery of new and innovative suppliers in the market.
With Brexit on the horizon, it is predicted that there will be an increase in the number of new UK businesses providing services, disrupting the markets with new solutions and ideas. With on demand support and the use of externals that are familiar with the ever-changing markets, organisations get access to suppliers that may have previously flown under the radar.
Points to consider
- On-demand services are more cost effective and target the specific areas you need addressing
- It creates the possibility of finding innovative and disruptive suppliers in the market
- Putting smaller areas of spend through group purchasing frameworks provides quick wins with no hassle