Not every company aims to become an international juggernaut, but they all strive for some expansion. While this brings many benefits, there are also certain growing pains involved.
One of the issues that growing companies face is the potential fracturing of the procurement process. This happens when individual departments deal with suppliers on their own. They all receive the same products, but they have separate contracts.
This makes matters more complicated than they need to be. What is more, this can result in higher costs down the line.
PASA, a website specialising in procurement news, showcased an interesting example of this. The case in question revolved around an international oil and gas company and its dealings with Coca-Cola.
Specifically, the company had two teams procuring products from the beverage giant. One team was fulfilling the needs of the company’s petrol stations while the other was buying products for their offices. The crucial part was that they had kept the details (and the contracts) from each other. By siloing information, the teams created extra expenses.
And, this was no small figure. It came out to $2 million a year. This became evident when the Chief Procurement Officer took an interest in the case and noticed the separate contracts. After consolidating them, those unnecessary expenses became a thing of the past.
This alignment had another benefit. Once the gas company had a better view of the entire situation, it also had a clearer understating of its relationship with Coca-Cola. This is very important for planning.
The bottom line is that consolidating contracts is an excellent way to bring your costs down. Siloing information can be very harmful, and your procurement team needs to do everything in its power to avoid it. To discover other things your procurement managers should be doing, reach out to the team at Promotional Centre.