Jason Karaian, March 2005
The final frontier
Procurement
What's the difference between a consultant and a paperclip?
This isn’t the set-up for a joke—though the mind races—but an actual question finance
executives across Europe are asking themselves, according to a recent survey by
consultancy Aberdeen Group.
Having wrung considerable savings from the buying of office supplies and the like,
procurement departments are now tightening their grip on the purchase of services such
as consulting, legal advice and temporary staff. But the biggest obstacle to savings in
these areas, said two-thirds of the 71 European executives surveyed late last year, is
that services purchase decisions are being made outside of the procurement function’s
control.
That’s not news to Alan Kirkley, London-based vice president for contracting and
procurement at Shell International Petroleum, a unit of the Anglo-Dutch oil giant, who
recently launched a crackdown on contract labour purchasing. This was no easy task,
given that this area of spending is “geographically dispersed, the invoice calculations are
more complex and relationships seem to matter more,” he says.
A big help is software from IQNavigator, a US-based services procurement specialist. The
software standardises job descriptions, which makes pooling demand for volume
discounts easier. It also centralises the approval process so that “appropriate discipline”
is maintained under the watchful eye of procurement, says Kirkley, who expects to shave
8% of the firm’s annual spend on consultants, IT contractors, and temporary accounting
and administrative staff.
As at Shell, the profile of procurement is being boosted across Europe. According to a
survey of 225 European purchasing directors by software vendor Ariba, released last
month, 70% say they now report directly to the board, up from 51% last year. This is
encouraging news, says Andrew Bartels, an analyst at consultancy Forrester, as buyers of
services tend to be more senior than those purchasing goods. To convince buyers to play
along with a cost-cutting programme, initiatives need a sponsor “at the CFO or COO
level,” he says. The potential savings, after all, are no laughing matter.
