‘Pay less’ the preferred tactic for Australasian firms to make savings

Paul Snell is managing editor at Supply Management
20 October 2015

Most Australasian organisations try to beat down suppliers on price to make savings rather than using other levers at their disposal.

A study by Grosvenor Management Consulting found eight out of 10 organisations rely on the ‘pay less’ strategy, where spending power is used to drive down prices.

Just over half of organisations employ 'buy cheaper' – managing buyer behaviour and specifications or taking advantage of discounts – and just under 50 per cent use ‘buy smarter’, where efficiencies are found in how goods or services are consumed by taking into consideration the total cost of ownership.

But fewer than a quarter of organisations across sectors employ ‘buy less’, reducing the consumption of services such as video conferencing to cut travel or double-sided printing to cut paper.

“For the procurement professional who masters these advanced spend levers and the new skills that go with them, the rewards are great: not just cost savings, but a host of other benefits too,” the study said.

However, the survey found the biggest savings did not necessarily correspond to the greater number of levers used.

“Doing more is not the best way to increase savings. Choosing the right levers, and focusing on implementing them well, is,” it said.

Tips from buyers for implementing the ‘buy less’ lever included reducing budgets to drive a cost-saving mentality, negotiating longer warranty periods to extend product life-cycles, and requiring buyers to justify all purchases.

The survey polled 81 procurement professionals in Australia and New Zealand, 54 per cent of which were CPOs, from a mixture of public sector, industry and services businesses.

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