Retail procurement needs to step up. Your Investors, Consumers and other Stakeholders demand it!

June 16th, 2010

I was reading a recent Aberdeen Group study and the strategic utilization numbers from all industries continue to trend well ahead of usage in retail. This made me angry. If you can take it, read on.

What troubles this author most about this is that the industries included in the Aberdeen Group study such as education, manufacturing, energy, utilities, financial services and others are all using these tools to trim their costs and improve earnings. Retail has had at best terrible earnings numbers historically with the supermarket industry averaging net earnings of below one percent (1%).

I was just talking with our CFO today about the impact of these tools. I used a very realistic example of a $2B supermarket company with one percent net earnings of $20M.  I can see the board now. If the same retailer were to source as little as $10M of their budgeted spend and reduced costs by just 20% or $2M, net earnings would improve in the budgeted year by 10%. If you are a CFO and can’t get excited about that, I’m not sure what would excite you.

This is not just rhetoric. We have customers with savings that are almost double that with a huge resulting impact on earnings. I know that there are a lot of bloggers and others out there that doubt the impact of e-procurement tools or think that reverse auctions as an example have run their course. Quite frankly that thinking is misguided because in the  retail industry the large majority of companies have never used these tools and have been doing business with many of the same suppliers for more than two years. These are both indicators of the fact that you are overpaying for products and services.

You can be comfortable and be busy or you can grab the bull by the horns and improve costs, earnings, stock price and even the bonuses of your management team.

We look forward to and appreciate your comments.

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