32% of companies admitted the procurement team was "not the main driver or didn’t play a significant role". © Getty Images
32% of companies admitted the procurement team was "not the main driver or didn’t play a significant role". © Getty Images

Firms 'sideline' procurement teams on logistics

9 May 2019

Businesses are failing to use procurement teams effectively when contracting with logistics providers and are potentially losing millions of pounds, according to research.

A survey found at each stage of procuring third-party logistics suppliers (3PLs), companies have “sidelined” procurement specialists, with 32% saying the procurement team was "not the main driver or didn’t play a significant role" in selection and contract negotiation.

Supply chain and logistics consultancy SCALA conducted the survey to examine the procurement processes some of the UK's best-known businesses use with 3PLs, including selection, contract negotiation, and contract maintenance.

Companies that get the best value out of their procurement teams referred to benefits throughout the process, said SCALA. Among these firms, at the negotiation stage 29% found high cost reduction, 35% got added value when negotiating contractual terms, and 18% reported improved key performance indicators.

John Perry, managing director at SCALA, said: “Leadership teams could potentially save millions in lost efficiencies and unnecessary costs by ensuring the effective integration of procurement teams with logistics.”

In companies where procurement teams play a lesser role, reasons were said to be due to “limited understanding of the procurement team” and “concern over poor decision-making”, said SCALA.

During ongoing management of contracts, 95% of companies admitted that procurement teams never, or only occasionally, played a role.

A survey of 3PLs showed the majority found increased use of procurement teams led to improved performance and better relationships and management of conflict between companies and their 3PL partners.

Perry commented: “The findings of our research are made even more concerning by the fact that so few companies are satisfied with the performance of 3PL relationships.

“For example, only 9% of companies are very confident that they got the best deal when negotiating their contract with a 3PL. Also, less than a third (29%) believed that contracts remained appropriate or effective throughout a typical 5-year term.

“Despite these factors, too many companies are still failing to give specialist procurement teams a proper role within the process.”

Participants in SCALA’s research included companies in sectors such as grocery, FMCG, electrical appliances and homeware, and 3PLs varied from regional to national.

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