Today’s service firms face extreme pressure to simultaneously grow the top-line and improve margins. In this economic environment where top-line growth is not likely to come from rates increases or additional domestic demand, companies must invest in new service-lines in new and emerging markets. However funding these investments while growing profits requires new sources of cost savings.
In the drive for cost reductions to date, management has gone down the list of obvious cost cutting strategies –employee layoffs, benefit reductions, service-line rationalization, and so on. Many leaders would say they have exhausted the possibilities for significant savings and are concerned that more of these traditional cost reductions would jeopardize the long-term success of the business. What many executives don’t know is that a hidden opportunity for savings remains. By managing indirect and under-resourced expenditures (i.e. marketing, travel, IT, etc.) companies can realize up to a margin point or more of savings. This spending is significant, consuming up to 60% of revenues for many companies.
14.9% of Service firm company revenues go to indirect, or non-product purchases
However due to the complex nature of these goods and services – made up of hundreds on subcategories each with unique supply markets – and the fragmented way in which they are purchased, most companies have not been able to optimize this spend and are leaving significant savings on the table.
Procurian helps Service Firm leaders drive sustainable changes in their cost structures and capture this missed opportunity to extract more value from their indirect spend.
As procurement specialists, we saw the need for an infrastructure dedicated to optimizing all indirect spend on a global basis. When we couldn’t find it, we built it. The result of Our Specialized Procurement Infrastructure™, a new and transformational approach to procurement that is being deployed by technology leaders to optimize spending, enable agility and drive savings and supplier innovation to fuel growth.