It’s a tired old trope: that when it comes to efficiency the private sector beats the public sector, writes Steve Malone of procurement services business Inprova about positive procurement.
It’s easy to find examples of inefficiency in both the private and public sectors.
But plenty of businesses may not realise that they could significantly improve their bottom line by adopting some best practices already used by many public sector organisations.
That’s not to say that the private sector isn’t using them. But there are contexts in which the public sector has been faster to implement efficient purchasing and procurement strategies – so businesses stand to gain by using the same ideas.
Take energy. The bulk of goods and services that businesses purchase are in markets that are fairly predictable where the price is largely driven by inflation. But energy buying is very different: prices are highly volatile and driven by international markets.
As a result, most organisations are not acquainted with how to risk manage their energy purchasing. They don’t understand the potential for evaluating different options and the added value for money that this can bring.
Generally, what happens is individual organisations wait until their contract is coming to an end to go out and buy. They don’t give any thought to the future – should we be buying to cover all of energy needs for one, two or three years? It’s done as a kind of last minute procurement – get it signed, get the energy ‘done’ – without thinking about what the longer term impacts are.
The public sector has already started to grasp that there are significant savings to be made in the way they purchase energy. In fact, a number of public sector buyers (NHS Trusts, local authorities, etc) and numerous housing associations have entered the market, often through small scale buying clubs designed to buy energy more cheaply.
Businesses can do the same. Crucially, though, collaborative buying needs to be backed by specialist intelligence and data about the complex energy market. Organisations need expert support to ensure they make the most of the opportunities. Risk management of your energy purchasing, better buying decisions, collaboration and being willing to learn from what’s already working for forward-thinking public sector organisations can provide considerable savings to businesses.
And specialist support can help businesses’ energy procurement strategies to be flexible enough to adapt to changing markets; to be more efficient; and save money.