Local versus Global Strategic Procurement: Is your company's purchasing power being fully leveraged?

By Gerry Carson, Managing Consultant
Service Provider Practice, Advocate Networks, LLC

Most business executives understand what it means to fully leverage their company's purchasing power. Nevertheless, implementing this concept and generating tangible savings can present a significant internal challenge. In a market where the top line declines and profit margins are challenged, strategic procurement has become today's mission-critical discipline. For companies that provide telecommunications service, purchasing network from other players represents a significant portion of cost of goods sold. For enterprise companies as well, telecommunications costs are a major area of cost scrutiny and potential cost savings.

How do you know if your company is fully leveraging its purchasing power? The first part of the answer is determined by how close current rates are to best-in-class rates. Is your company paying above-market rates?

The remainder of the answer depends on the extent to which your company purchases from vendors on a local, city-by-city basis or on a regional or global basis. Many companies have decentralized purchasing authority without procurement oversight, and the result is purchasing on a local basis. Clearly, an improved approach is to leverage the total spend with each vendor when making purchasing decisions.

Strategic procurement is the optimum solution and it should introduce competition through a Request for Proposal (RFP) process. When all vendors compete to win and retain business as part of a third-party-managed RFP process, total spend can be leveraged, the network can be optimized, and savings results are maximized. Vendors are typically not responsive to requests from a customer to lower price. When an RFP partnership is established, there is a powerful third-party effect that generates greater responsiveness and savings results.

To learn more about the Strategic Procurement process at Advocate Networks, please contact Gerry Carson at (678) 987-5905 or gerry.carson@advocatenetworks.com.