Implementing a Low Value Strategy for Procurement

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Implementing a Low Value Strategy for Procurement

• Rowena WardStrategic Procurement Services

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LCE Expenditure Analysis

• Consolidated spend for
• 2003/4 15 boroughs LFEPA
• 2004/5 17 boroughs
• 2yrs data from 10 boroughs
• Based on invoice data only
• Analysis performed on influenceable spend (as
  opposed to payments to central government,
  individuals etc.)

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2004/5 Expenditure Analysis
Procurement spend is influenceable spend on
goods, services and capital works with third
party organisations. Influenceable is defined
as being spend where the cost, quality, service
level or trading process can be affected by human
intervention.
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In London . . .

• Spend across the 33 London boroughs is estimated
  as being around 7.6billion p.a.
• Boroughs process on average 150,000 invoices
  p.a.
• Over 70 of invoices received are less than 500
  in total value (typically catering, cleaning,
  clothing, materials, utilities)

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In London . . .
Invoice profile of a typical borough . . .
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In London . . .

• A borough will use around 9,000 different 3rd
  party suppliers in a year
• 20 spend -gt 12 suppliers
• 50 spend -gt 80 suppliers
• 80 spend -gt 400 (5) suppliers
• 45 of suppliers are not re-used in subsequent
  years
• 40-50 of suppliers will provide a single invoice
  in a year
• 25 of these not re-used in subsequent years
• 75 of invoices lt500

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In London . . .

• There is a very high number of low value invoices
  received by a borough in any one year
• Boroughs make low value purchases from suppliers
  who will only be used on an occasional basis
  (i.e. no relationship will be formed)

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What Do We Buy?
Risk
Bottleneck ensure suppliese.g. specialist care
provision, interpreters, specialist
components/services
Strategiccontract/supplier managemente.g.
outsourcing, care provision, housing provision,
waste management, works

Routine minimum attention e.g. stationery,
courier services, general maintenance supplies,
printing, cleaning materials
Leverage drive for savingse.g. IT, vehicles,
utilities, advertising, temporary staff
Value
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Where Are The Low Value Transactions?
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Low Value Transactions
Categories of spend with more than 500 invoices
per year and an average invoice value of less
than 500 (usually over 50 of invoices received).
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In Summary . . .

• Low value purchases and invoices are not
  necessarily routine purchases
• A number of strategies and solutions will be
  needed to appropriately address the issue (i.e.
  one size doesnt fit all)
• Focusing on a small number of procurement
  categories and suppliers can result in
  significant improvements in a short timescale

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Benefits

• Remove administration and increase productivity
• Enable indirect savings to be made through a
  reduction in administration and paperwork, while
  still allowing probity to be maintained
• Enable direct savings to be made

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Benefits

• Enable better procurement planning and
  opportunity analysis
• Accelerate the return on investment into systems
  such as e-Procurement and purchasing cards
• Encourage standardisation on use of suppliers and
  procurement routes for routine purchases

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What Are Our Options?

• Business Solutions
• Roles Responsibilities
• Centralising Budgets
• Authorisation / Financial Limits
• Framework Agreements
• Standing Orders / Financial Regulations and
  Non-Compliance
• Audit

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What Are Our Options?

• Technology Solutions
• Purchasing Cards
• Buying Online
• Market Places / e-Procurement
• Use of Finance Systems
• Self Billing
• Invoice Consolidation
• Contracts Register
• Management Information
• E-Auctions / E-Tenders

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How To Make It Happen

• Understand your spend
• Define appropriate procurement routes
• Liaising with buyers and suppliers
• Stakeholder analysis
• Identify quick wins
• Reviewing and resolving issues identifying
  further candidates and ongoing improvements

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Thank you for your time.

• rowena_at_strategicps.co.uk
• www.strategicps.co.uk