Tracking procurement savings in portfolio companies
In an article published in the PEI Operational Excellence Special, Declan Feeney and Waldo Saville from Efficio discuss how Private equity firms may be reticent about procurement as an improvement lever due to concerns around implementation in complex industries, where management may commit to cutting costs but fail to deliver on agreed plans.
It can be challenging to ensure identified savings make it through to the bottom line, often owing to poor engagement with the business or a lack of compliance from line managers who do not support the new initiatives.
While there will be plenty of quick wins, the greatest savings may come from high-impact categories of spend that will take longer to impact profitability. The key to effective delivery of procurement change is to identify, deliver and then track savings. Many of these historic challenges can now be quickly addressed through the use of advanced and effective systems to record and track savings on the back of procurement initiatives.
If CFOs in private equity-backed businesses have access to technology capable of monitoring the progress of savings programs, the strategic value that procurement can add becomes immediately apparent.