The role of procurement in the drive to reduce costs

Having recently read an article in the Caterer and Hotelkeeper about how purchasing is all about knowledge and information I am concerned that in the drive to reduce cost we lose sight of the quality of the products or service.

I understand the benefits that undergoing a procurement exercise can bring through rationalising suppliers and seeking alternatives. I have seen at first hand the complacency that creeps into mature supplier contracts and totally endorse the need for market testing on a regular basis. Procurement should be an essential element of an organisation’s operating strategy however I do not whole heartedly agree with the procurement specialists who espouse that obtaining the best price is the most important objective. It must be accompanied by the caveat: the best price for the quality required.

Is it possible that the current situation with food manufacturers and retailers buying products containing horsemeat, has been driven largely by cost saving measures? Prices have been beaten down by experienced procurement specialists to improve margins, which has led to the need to cut corners. Something has to give and in this case cheaper alternatives were found and used as substitutes. This doesn’t excuse those who make the products but the scale of this problem suggests this is more than a few unscrupulous operators.

For organisations such as schools and hospitals, where budgets are extremely tight, finding the best deal is of paramount importance but the point has been reached where price has been put ahead of quality to the detriment of the end user. Procurement strategies must support those who work to build the reputation of an organisation and making price the key point of focus may well frustrate this. Investigate how the product/service can be delivered for the price before signing on the dotted line.