09 April 2009 | Jake Kanter
UK companies could save as much as £65 billion a year in total through better purchasing, according to research by buyingTeam.
The procurement outsourcing firm analysed FTSE 250 companies' annual reports to find out what their total "non-core" spend was last year. It compared the figures to its own data, and believes businesses can save 18 per cent on average through improved procurement.
It estimated UK firms spend more than £350 billion a year on indirect goods and services and said the potential savings of about 18 per cent - or £65 billion - could be made through better supplier relationships and managed costs.
"It is amazing that, despite the current economic retraction and the daily reality of redundancies, organisations can still be so unclear about what they are spending their increasingly hard-to-earn capital on," said Guy Strafford, client services director at buyingTeam.
Savings could often be made, he said, when companies gained complete visibility over spend. He advised businesses to cut out unnecessary suppliers and check when contracts were last reviewed or renewed.
LG Electronics is example of a company that is tackling its indirect spend to make savings. CPO Tom Linton hopes to cut 20 per cent from its $10 billion non-material general procurement by improved category management and better leveraging spend across the firm. "The magnitude of the potential savings is enormous," he told SM.