Your company starts to grow, and you need more technology to keep up with additional staff, customers and to help improve process. You are aware of the efficiencies and cost savings made possible by new technologies and are upgrading their infrastructures as a result.
But are you aware of How Purchasing more Technology can lead to Cost Creep?
Most businesses at one time or another outsource due to limited internal resources. But what happens when you aren’t in control of your vendors terms, cost of services or even quality of work? How much is that costing your business?
We recently came across a company that used 3 companies for network support. One company was more expensive than the other one and took longer to complete work needed, but the quality that was performed always met their standards. Because they had a limited schedule and were more expensive the company had to at times opt for a couple of other vendors that did not meet the same quality of stands. They did not show up when scheduled, had poor work habits and didn’t complete the job fully so they had to make several trips. Sometimes they would return with a different technician which presented other issues like familiarity with the systems, software, project or service.
Typical spend data is not useful to provide business insight and drive informed decision making. In many large global operations, spend data originates from different people, in different organizations, in different locations, even using different vernacular or languages, and all with different requirements. Further, it is typically coded from a financial perspective. While General Ledger (GL) and cost center are helpful for the finance organization, they do not provide the views needed to drive procurement decisions.
How can procurement and vendor management become more aligned with, and demonstrate its impact on, the main measures of business success? What impact does procurement make on a company’s sustainable shareholder value? This is a question that CPO’s face but few have been able to answer.