Proxima e-book proposes some solutions to the procurement dilemma

In part 1 of this review, we looked at the new e-book from Proxima, the procurement outsourcing firm. It supports their excellent report from last year on “Corporate Virtualization” which showed that 70% of revenues on average for large firms was spent on third party (procurement) costs. The new e-book is aimed at senior managers (not just procurement) and is called “Drowning not waving – how Corporate Virtualization has got business leaders out of their depth... And where the real opportunities lie”,  and in part 1 we outlined the problems it identifies with organisations’ current approach to procurement.

Proxima point out that a company’s staff account (on average) for only one-eighth of revenues, but they get nearly all of the business leaders’ attention. Suppliers account for a lot more of the total spend – and get very little attention. Very true. Yet suppliers are vital; as the e-book says, they determine “ how innovation is optimized… how corporate objectives are served… how productivity is driven… how communications are handled… and how risk and transparency are managed”.

And managing suppliers properly takes a lot of attention, assuming you can even find the right supplier in the first place. With the nautical / fishing analogies continuing, “Procurement does not have the resources or knowledge to take care of all of the lines. It really is the impossible job”. So what does procurement do? It focuses on something it things it stands some chance of delivering – driving costs down. So it beats up suppliers, who are the very source of the organisations success. “This is crazy”.

And it doesn’t even work. Suppliers give concessions, knowing that contracts are under or badly managed so they can reclaim their margin over the contract period. In other cases, Proxima say, senior executives don’t trust procurement, and they understand that suppliers are key, so they look to “do the fishing themselves”. They blame procurement but procurement is not to blame – the senior executives are.

The final part of the e-book then provides at least one answer to this problem, which is of course to engage “people who have as much – if not more – knowledge in the field as the specialists themselves”. But it isn’t feasible to employ the number of people required to do this, so why not use an external supplier? I wonder who that would be, then?

Well, after this strong presentation of a powerful argument, we can’t blame Proxima for including a bit of a sales pitch. And to be fair, even the discussion around the benefits they can bring is quite sophisticated, focusing as it does on value rather than cost savings. Changing internal behaviour, demand management, innovation, growth all get a mention - three cheers for that.

All in all, we congratulate Proxima for taking a different approach to getting the message across. Are senior non-procurement executives more likely to read this than another “white paper” or PowerPoint presentation? I think so, although I guess some might be turned off by the graphic-based format. I rather liked it myself but that’s down to personal taste, but there is no doubt the e-book raises some important issues.

Anyway, let’s leave it at that and encourage you to spend 20 minutes ( that’s all it will take) to have a look yourself - download the e-book here.

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First Voice

  1. bitter and twisted:

    Proxima’s 250 (?) staff know everything about everything ?

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