How to deliver a successful procurement cost-reduction program: Book review

We welcome this guest post from Peter Smith, MD at Procurement Excellence, CIPS past president and business author. 

This month, I thought for a change I would provide a review — three reviews actually — in my monthly Spend Matters slot. I’ve read two recent books that highlight very different aspects of procurement strategy and delivery. I wanted to feature them as they are both worth reading, but they could not be more different in terms of exactly how they might be useful to procurement practitioners.

For my first book review: Profit from Procurement was written by three senior executives from procurement consulting firm Efficio. Alex Klein, Simon Whatson and Jose Oliveira absolutely understand the importance of procurement and have decades of experience in delivering procurement programmes to clients of all shapes and sizes. The subtitle is “Add 30% to your bottom line by breaking down silos,” and the book is focused almost entirely on how to deliver a successful procurement cost reduction programmes.

No-one could accuse the authors of talking theoretically — the advice is clearly based on real-life experience, and is presented in a direct, clear and well-written fashion. In quite a few areas, it is the most useful material I have read on the topic. For example, the chapter on tracking and measurement of benefits goes far deeper than anything else I have seen.

The authors have not always been impressed by the procurement people they have met, given some of the comments. They are not convinced by procurement positioning itself as some sort of special “credentialized” profession – the “strongest procurement people are the ones who never feel the need to mention their professional skills — they just relate well to the stakeholder and they do good work.”

However, the approach put forward here is not radical really, in many ways it’s a traditional category management (CatMan) methodology, familiar to many (and the CatMan material is not as detailed as in Jonathan O’Brien’s superb book Category Management in Purchasing: A Strategic Approach to Maximize Business Profitability. But the greatest strength of Profit from Procurement is in its coverage of the nuts and bolts of creating a programme, gaining sign-off and buy-in, prioritizing work, tracking benefits and so on — all the issues that sit around the core CatMan procurement activities, you might say.

I also found the chapter on how private equity firms perceive procurement and work generally very illuminating, the comments on technology are spot-on, and, as you might expect for a consulting firm, material around how to use consultants successfully is first-class.

When cost-reduction is still an important part of your job

The book’s core strength and focus does mean that there is little space for anything other than cost reduction. The chapter on non-savings priorities focuses largely on sustainable procurement and reads like a bit of an afterthought. However, as the authors put it, you must deliver savings (or effective cost management), because that “gives you the credibility to expand your mandate and remit and go further than just savings.”

I agree with that and as long as you understand the book’s objectives, it is highly recommended to anyone who still considers savings an important part of their job, and it is essential reading if you want to drive that through a structured programme approach. Indeed, even if you think that you have moved on beyond a savings focus, you should probably still read this. It may well persuade you to go back and look again!

“Profit from Procurement” is strong in terms of recognizing the need to align procurement with internal stakeholders, and how to organize programs to support that. It does also touch on the softer skills that procurement people need to achieve that buy-in, but that is not its real focus.

Tune back in for my second book review — “Sweet Stakeholder Love — Powerful Insights and Tactics to Deal with Stakeholder Issues Better and Achieve More Success at Work” by Sigi Osagi.

And if you are looking at a procurement cost-reduction program, there are many tech solutions that can help you. To identify and compare products and their providers try Spend Matters’ TechMatch.