The public sector is currently facing key issues already experienced by the commercial sector at the start of the recession. Whilst private sector organisations are continually motivated by the bottom line, the political master of purchasing professionals is asking 'How can we deliver greater savings with less staff? How are we going to manage resources and tougher budgets to deliver savings we weren't able to deliver before May 2010?'
In short, a quick review of some issues around efficiency and cost – allied to the historic Gershon Efficiency Review - reward with some fundamental questions that need tackling. All of which the private and public sectors should prioritise to help drive down the cost of one of the largest indirect procurement spends, ICT.
How can we do the job smarter? How can we reduce costs, reduce time to do tasks, do we need to perform certain tasks, is there a simpler way? The points to note are where time is lost, where information is difficult to find, where lack of quality information erodes buying decisions.
For time strapped ICT buyers, purchasing amidst an incredibly dynamic and volatile ICT market is a near impossible task when considering the context of the savings diktat. How are buyers meant to consider resolving purchasing questions when they are struggling to keep up with the volatility of the market with no decent data to hand:
- What is our current buy price?
- Have similar spec machines reduced in price below the product selected?
- Has there been any change in laptop prices?
- Has component pricing reduced?
- Are there any special deals in the market?
The problem in most organisations is that purchasers have to negotiate multiple sources and locations of information before the critical analysis and decision making can begin. The key to productivity and cost reduction in purchasing therefore begins with a central data or information repository, offering granular levels of market and product detail to empower sustained best value on every purchase.
The IT market place is dynamic – product, price and stock change daily. In an average day there are approximately 8,000 price changes. During the last 7 months the Mercato ITelligence data bank logged 99 days where there were 20,000 price changes each day.
- On 70% of those days there were more than 10,000 price changes each day
- On 2 of the days there were unprecedented developments with over 30,000 price changes each day
- On these 2 days approx 20% of all IT products in the market changed price
An example of the market's agility to news and its impact on price looks at July 2010 when AMD introduced a new chip to the market. Every day of that month saw above average price changes allied to laptops and desktops. On July 6th over 34,750 price changes occurred in a single day on approximately 20% of all IT products in the market. AMD spawned some pricing issues where the performance of its new chip made some of the recently introduced Intel based products look expensive. This caused large volumes of price decreases across the market, providing a superb value-driven buying period on specific Intel related laptops and desktops.
The point is, the unique quality of the IT market is the rate of new product introductions, stock and the changes they deliver. No other market moves as fast or as high/low as the IT market across such a large product range. How can a purchasing team track changes in the price of IT products even for a small selection of products? How can organisations hold granular information and allow teams of people access?
Let's consider some comments made by Sir Philip Green in his report of October 2010. Purchase price is a common problem with considerable variations in prices paid for goods within the same organisation on the same day. A number of studies have shown prices paid vary as much as 8% to 12% for the same product.
This lack of discipline in pricing is one of the key issues for Government purchasing today. In part, this relates to internal mechanisms and the ability to reference updated master purchase price information.
To be effective requires frequent updates in trade level information, plus access to a wide range of data to enable better buying decisions, which deliver improved business outcomes. The data must be accessible from one source covering all the products in the IT marketplace and more importantly must have automated alerts related to changes in price. Without such a support system how can professionals execute their role effectively?
Research by IT benchmarking tool, Mercato ITelligence, confirms that many proactive buyers and budget controllers are regularly challenged by price and stock changes in the volatile ICT market. Analysis has found that 81% of organisations could achieve better deals with more market information.
Mercato ITelligence is a simple online tool that advises IT buyers of trade guide price and stock levels on products, empowering IT buyers with market knowledge, so they can rapidly negotiate down the price of IT products with suppliers. By introducing true transparency into a relationship, the supplier also benefits from a faster more efficient deal process.
Buyers simply input supplier product lists or spot checks online for an automated impartial comparison with trade guide price and stock on products held throughout the supply chain daily. The user discovers what margin their supplier is proposing and receives daily alerts in relation to their uploaded Product Lists, stating whether price or stock have moved.
Mercato ITelligence helps buyers combat the challenges of a dynamic IT supply chain by providing critical market information to empower better buying decisions and negotiation from a position of strength quickly. It also enables the policing of cost plus agreements and is saving between 3 – 24% on IT budgets.
In the current testing economy this is a procurement and budget control tool that is more relevant than ever before, delivering both cashable and non-cashable savings.
Buyers benefit further by manipulating and interrogating lists by preferred supplier, project budget or even financial quarter and can automatically generate RFQ's. For financial controllers, myriad management functionality improves spend visibility and forecasting power.
Its functionality gives the ability to track market trends and understand how external or economic factors are affecting price. This knowledge means users can predict what direction pricing is expected to go and this helps plan for bulk buying on big projects at the optimum time for best value.
Knowing total stock availability within the channel tells users exactly when to buy. If it is in-stock then great but on a deeper level if they know there is an overstock scenario then it's a great time to negotiate an even better deal. Now is the time when progressive organisations are embracing technology that transforms and supports business processes to reduce wastage, improve transparency and drive down the cost of buying ICT from a purchase price and process point of view.
Mercato technology is accredited as offering a Best Practice Best Value approach by the Institute of Chartered Accountants and recently achieved a global procurement accreditation from the Chartered Institute of Purchase & Supply (CIPS).
Head of the CIPS Procurement Excellence Programme, Mike Mari, said: "As a former procurement practitioner I can see the value add that Mercato can offer in taking forward the role of procurement professionals operating in a transparent environment, offering good practice in procurement policies, procedures, and ways of working."
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www.mercatoITelligence.co.uk
