Prioritising cash release

Sustained cash release should be the number one priority for Public Sector bodies to fund further investment, David Brown writes.

“Organisations need to consider how they can quickly realise cash to create momentum as part of procurement transformation programmes.”

The current economic climate, increasing regulatory pressure and public perception of value for money is driving organisations to focus on how they reduce operational costs. Money saved is then re-invested into programmes that deliver long-term benefits to their local community.

A major part of this is the forensic review of procurement and commercial operations to enable the release of significant amounts of capital from operating budgets without diminishing the service provided.

Since 2008, the private sector has had to squeeze more from their budgets and the strategies they have taken are equally applicable in the public sector. Indeed for public sector organisations, this is seen as a way of operating as a more commercially-focused outfit and, as the London Olympics showed, a public sector organisation delivered the games to cost and on time.

Once benefits have been identified and a co-ordinated programme has been put in place to deliver them, the issue remains: “How can the organisation make this practice sustainable?” The answer is the development of the appropriate capability and operating model.

Increasingly companies and organisations are implementing shared service operations but the link between procurement, commercial strategies, execution and delivery is key. How do you make sure that they are aligned? And how do you ensure that the objectives are maintained long-term?

Our experience positions us to advise on and deliver procurement transformation programmes through:

1. Identifying the right procurement and commercial strategy and capability;

2. Development of the benefits delivery roadmap;

3. Implementation of the long-term organisational capability; and

4. Delivery and retention of the benefits.

Key to driving large scale transformation programmes is the ability to deliver savings quickly. These quick wins generate momentum and enable funding of more capital intensive initaitves as well as being a good news message to stakeholders, including the public.

This requires skilled procurement practitioners as well as experienced operations know-how that understand the following key elements:

1. How to construct best in class contracts to drive value out of commercial arrangements with suppliers;

2. How to get the best value from the contracts that are in place through use of frameworks and mini-tenders; and

3. How to affect demand levers that will reduce spend of a particular category.

Examples of this in practice are a large city council driving savings across its capital and operational spend which will deliver sustained savings over a number of years keeping council tax down and services up. The same principles are being used to support a global brewing company in delivering benefits across all regions to improve its price competetiveness.

With the (optimistically) improving outlook on the economy, there will be no let up as this focus on cost reduction has now become the expectation in the public eye. Companies that have completed it are now able to run more efficiently and stay ahead of the competition.

David Brown is the Supply Chain lead for Ireland in EY’s Advisory Service Line.

EY, Bedford House, 16 Bedford Street, Belfast, BT2 7D

Email: dbrown@uk.ey.com