A Good News Week for Proxima, procurement outsourcers

Last week was a good one for Proxima, the London based procurement outsourced service providers.

They picked up a new contract from CSM, a Dutch food company.

"The contract marks the beginning of a strategic relationship that will see Proxima manage CSM’s third party (indirect) expenditure across the company’s European operations. CSM selected Proxima for its depth and breadth of capability in Europe, drawing upon Proxima’s extensive track record in the FMCG sector. Proxima will provide CSM with a full suite of procurement services for third party expenditure".

I had to do a bit of investigation just to find out what CSM do - the press release was thin on information, probably at CSM’s insistence, I suspect. Increasingly, firms are sensitive about releasing information on this sort of thing, whether on grounds of competitive advantage or other sensitivities I'm not quite sure. But based on extensive research (googling them) I discover that -

"CSM is the leading player in its sectors worldwide; the largest supplier of bakery products and a leading player in natural food preservation, green chemicals and biopolymers".

I'm ashamed to say I've never heard of them as they're a large firm, with revenues of around 3 billion Euros a year. Based on my experience of the food industry, I would expect indirect spend - which is what Proxima are going to handle - would account for 5 - 10% of revenues (depending heavily on the size of advertising budgets). So that would suggest annual spend under management going to Proxima could well be around £150-200 million - a pretty good sized contract win.

Good news part 2 for Proxima came in the decent set of annual results published by Morrison's, the UK's fourth biggest supermarket chain. Turnover was up 2.3% to £8.9bn, underlying profit  up 1% to £445m and underlying earnings per share up 10% to 13.09p.

Proxima manage much of their indirect procurement spend as well.  What was interesting, and somewhat  unusual, was to see procurement mentioned as one of the factors contributing to increased efficiency. (Like CSM, Morrison's aren't too keen on promoting the fact that they've gone the outsourcing route, but we know these things of course)!

In fact, the indirect spend  activity it got a whole section to itself in the Morrison’s statement:

"Tackling indirect procurement

We are well advanced in our three year programme to review every area of cost, both capital and revenue. Our colleagues have responded well to our challenge of identifying unnecessary costs in the business.

During the period we launched a wide range of initiatives to help us reduce our costs. Some of these, such as respecifying the range and thickness of our bin liners, were significant. Others, such as respecifying our flower buckets and the introduction of energy-efficient lighting, were smaller, but they are all contributing to help us meet our target of delivering £100m of savings annually by 2013/14".

I'm not sure bin liners and flower buckets quite capture the excitement and challenge of indirect procurement in all its glory, but well done to Proxima and more signs that procurement outsourcing is continuing its steady growth and penetration into more major firms. Not usually in a big bang, outsource everything sense but rather piecemeal, based on specific categories, or indirect spend, or elements of the process.

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