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Procurement savings could provide £53bn boost to FTSE-350

The UK’s 350 largest companies could boost profits by £53bn
if they cut their procurement and supplier costs by just 5%, according to a new
study.

Procurement adviser BuyingTeam believes that rather than cutting cost by
reducing headcount, business needs to focus on reducing procurement costs.

Analysts expect a steep decline in company revenues in 2010 ­ the double dip
­ and that these savings could be made by tackling inefficiencies in procurement
and supply chain.

BuyingTeam identifies eight sectors that would most benefit from a 5% cut in
procurement costs: construction and materials, chemicals, technology hardware
and equipment and general retailers. It says that, currently, almost half of all
sectors represented in the FTSE-350 show significant variation in the efficiency
of their procurement programmes and that the least efficient in the construction
and materials business could see as much as a 140% earnings increase if it made
the 5% procurement cost cut. Fixed line communications, mining, electronic and
electrical equipment and beverages are the sectors where the most efficient
procurement strategies are found.

“Procurement is so often overlooked as an effective tool when looking to
recoup earnings,” says BuyingTeam CEO Matthew Eatough. “Indirect costs are a
less visible part of the cost structure of many companies, but have significant
potential for unlocking value. As the need to make additional cost cutting
continues into 2010, we believe this is where companies can deliver real
immediate value, while ensuring they are still poised to take advantage of the
eventual upturn.”

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