Research & Insights
Take Negotiated Savings Out of Budgets: Procurement Myth No. 9

We continue our series on the top 25 procurement myths. Some you may know, others maybe not. You also may agree with us on certain ones and not others. But, the important thing is that we have this discussion. We will post one a day here on Chief Procurement Officer, so make sure to check back on the site to catch them all.

9. Procurement must ensure that negotiated savings are removed from budgets

For indirect spend, it is not procurement’s job to reduce stakeholder budgets to ensure that negotiated savings come out of the stakeholder budget. Procurement’s job is to create the value (hopefully increasingly with suppliers to grow the total pie and equitably do a gain share), but it’s up to financial controllers and the businesses to negotiate how much of the value is passed on to the budget holder, reinvested in broader enterprise initiatives or passed on to shareholders. This process should also be transparent and professionally managed. Otherwise, procurement will merely be seen as finance’s lackey (again, no offense to finance), and an indiscriminate budget reducer. It’s hard to get returned phone calls when this is the perception!

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