In this paper, we take on some of the key myths and fallacies of the procurement world. The most important is that procurement is primarily about reducing expenditure. That is the view that takes us into horsemeat in burgers, packaging that falls apart when you touch it, lousy call centres, and ineffective marketing spend. So we look here at the three occasions when it is clear that procurement should be prepared to spend more – from the obvious to the less so.
We also introduce the concept of Value Categories – spend areas where spending more can add to overall shareholder value. Such categories, and there are many, need a more subtle approach from procurement rather than simple unit cost reduction. As an example, we look at marketing spend, and analyse why the return on spend curve is so important. That even leads us into answering the age-old question – if we save money on a marketing spend area, should that saving be retained by the Marketing Director for re-investment, or returned to the CFO? We can answer that with the help of a graph or two and a bit of mathematics!