Despite various reports claiming an improved financial outlook for the UK, most economists are still trying to manage expectations. The fact that interest rates are predicted to stay low for some time illustrates the reality that for most people, the purse strings will remain tightened for the foreseeable future.
The same is true in business. The clients that we speak with are in no mood to break open the champagne because the underlying conditions have not disappeared. Operational efficiency, cost control, lean operations; all remain high on the priority list and the same is true in education.
The reality is that, like many businesses, education institutions are failing to take basic steps to stop money draining away, finding it easier spending time and effort trying to control costs through reactive or controlling measures instead of trying to generate savings by challenging the underlying issues. Change is never easy and the journey can be hard, but the results can be astonishing.
We work with businesses across many sectors who are looking to save money and be better at procurement. The common theme across both the private and public sector is that when an organisation is focused on delivery, it is too easy for them to overlook obvious inefficiencies and dedicate time or the right skills to rectify those problems.
Simple steps to improved procurement
There are a number of simple steps that further education bodies can take to improve procurement performance. They include:
• Engage with the market – engagement with consortia can help to drive savings through:
o Economies of scale, leveraging greater supplier discounts;
o Reduced internal resource burden, split responsibility across members;
o Benefit from wider knowledge pool across consortia.
• Create a simple procurement environment: Ensure the correct systems are in place, a Purchase to Pay (P2P) system enables greater control, visibility and management of all third party expenditure. This leads to:
o Control, allowing procurement to be involved in the spend approval process as well as monitoring compliance;
o Visibility, allowing procurement to spot areas of opportunity through category and supplier consolidation;
o Management, allowing spend to be directed to contracted or preferred suppliers.
• Become fact driven, not hunch led: Spend analysis tools and expertise will allow a college to understand:
o Spend by category, department and faculty;
o Supplier profiles – spend by supplier, category coverage, financial risk assessments, geographical coverage (used to support local supply chain agenda);
o Trend analysis;
o Contract management – alerting the procurement team of contract review, extension and renewal dates;
• Sing about success: Create a procurement dashboard advertising the benefits delivered by procurement and place on the college intranet. This will:
o Demonstrate the value add effective procurement can bring;
o Encourage all staff to contribute in delivering savings to the bottom line
The benefits of improved procurement
The benefits can be seen immediately in the form of savings to the bottom line – but it doesn’t stop there. A more efficient process enables all staff to focus on where they deliver the best value to the college and the additional funds can be used towards enhancing the student experience and further investment in teaching.
Secondly, improved procurement means improved compliance, both to internal policy and process as well as OJEU regulations. It reduces spend leakage to non-contracted or non-compliant suppliers – in our experience a lack of contract compliance is one of the most common reasons organisations are losing money. So by improving the process, a college saves money and reduces the risk of a legal challenge from a supplier or the European Council.
Finally, greater consortia engagement can help to reduce internal procurement resource requirements, and allow resources to be assigned to further value add activities such as contract management.
The opportunities are there and they start with procurement. Colleges cannot afford to turn a blind eye to profit-draining inefficiencies and must tackle inefficient practices that have become normalised.
For further information visit www.capita.co.uk/procurement
Kieran Sullivan is a client services director for Capita Procurement Solutions