The Power of Procurement - A growing trend towards a more centralised model 

Richard Nixon, Partner, KPMG in the UK: In the current economic environment, I’m not surprised at all that organisations, whether they’re in the public or private sector, have chosen to take a more centralised approach to things. It helps them get their arms around cost, it helps them drive benefits for the business and also it helps them minimise cost in terms of the organisation itself. Whether it’s the right model for the future, when the economy turns and growth comes again, is yet to be seen. But 3 years ago, we forecasted that this would happen and lo and behold, it has.

Ray Slayford, Partner, KPMG in Australia: I think the growing trend towards centralised procurement models is something that’s been evolving in our part of the world, in Australia and Asia Pacific probably over the last 4 to 5 years, so it’s not inconsistent with what our clients are telling us around the move to more centre-led procurement model.

John Tros, Partner, KPMG in Netherlands: I think I am partly surprised, yes, because if you looked at very mature procurement organisations, they don’t have a centralised procurement organisation any more. It’s scattered all over the world. People are constantly travelling. And, it feels that nowadays the centralised procurement departments are set up to have more grip on procurement. And in the end, it should be business-driven and a business-driven procurement department is almost never completely centralised.

The Relative Benefits of Centralised & De-Centralised Procurement Models

Richard Nixon, Partner, KPMG in the UK: I think the challenge of centralised versus decentralised procurement is an interesting one. What’s really important and what procurement functions often miss is how strongly they should link in to the overall business strategy. So for example, if a business acquires or wants to develop a new product then having procurement in a centralised function isn’t necessarily going to be the best model to develop that new product, to get into new markets and to grow profitability. It’s not all about cost. It’s about driving innovation. It’s about driving value for the customer and minimising risk as you work through that process. So, sometimes centralised works best certainly if you’ve got a low complexity business. However, if you’ve got a complex business, if you’ve got new products, new services evolving and emanating then, maybe, in those cases a hybrid or a decentralised model is going to serve you better.

Ray Slayford, Partner, KPMG in Australia: I think organisations sometimes struggle to move directly to a centralised model or centre-led model and I think although it’s shown that you get better savings from the centre-led sort of procurement models and structures, clients naturally have to go with their business models and sometimes their business models are by definition disaggregated or decentralised and procurement sometimes has to follow that. So, it’s a bit of a challenge.