By Daniel Hunter
Expense Reduction Analysts (ERA), has called on the boards of UK businesses to work closer with FDs and procurement teams to avoid unnecessary cost cutting measures in supply chains - which could compromise quality of products and services — in an effort to manage rising business costs.
"This recession has left businesses with the huge task of managing the continued rise in business costs, and many have opted to cut costs by changing their suppliers," Rob Allison, managing director, ERA, commented.
"However, the on-going horsemeat scandal has highlighted the dangers of using suppliers without having comprehensive audit checks in place which ensure the quality of the goods and services being purchased."
Unfortunately there is a real risk that businesses in other industry sectors could also be risking their reputations by purchasing goods and services without the proper checks in place. To emphases this point, a recent survey by ERA found that
- 46% of the companies surveyed stated that their company only discussed procurement at board level only once a year or never
- 4 out of 5 organisations don’t have a specialist procurement team or individual
- 52% of FDs felt employees suffer from a lack of time, experience and energy when it comes to securing the best supplier deals
- only 21% of FDs viewed their suppliers as strategic partners.
While regular supply chain audits cannot guarantee the eradication of criminal minded individuals, it can certainly reduce the risk of not identifying them until it’s too late. However it is also essential to ensure that all employees who’re involved in the purchasing of goods and services are given sufficient support and training. And it’s also imperative that those people provide accurate measurements and detailed business intelligence to their FD so they can provide strategic guidance to the board.
In addition, it’s essential that businesses and suppliers develop sound relationships and work together to create transparent and efficient working relationships, implementing smarter spending strategies to ensure reputations are kept intact on both sides.
Allison concluded: "Organisations must start thinking long-term instead of short term. Cutting costs may keep businesses afloat temporarily, but if the correct checks aren’t put in place businesses are risking their long-term future. A smarter spending strategy, combining effective cost control and development for innovation and investment is the only way businesses will be able to successfully ride this storm."
Join us on