Monthly Archives: January 2009

Unleash the war on procurement spend and increase profitability

Unleash the war on procurement spend and increase profitability

? The key question on the minds of many business managers in the Middle East is how to manage a company in 2009 and maintain profitability. Here in the United Arab Emirates (UAE) we have witnessed many companies opting to lay off many employees in an attempt to reduce expenses. Anticipating a reduction in the growth rate in 2009, organizations are now also exploring other alternatives to reduce expenses to improve the bottom-line.Procurement provides the answer.Depending upon the industry, most organizations spend more than 60% of their revenues on procuring products and services from the market. The ratio of revenue to procurement spend varies from one industry to the other. For example, this ratio could be could be as high as 70% for a manufacturing firm .Therefore, it is extremely important for organizations to conduct a detailed analysis of their annual procurement spend to identify spend categories which can result in major savings for the organization. Due to massive growth in the last four to five years, many organizations in the middle east have not been carefully managing their procurement spend. Although procurement departments are assigned with the task of managing the spend while maintaining the quality however the speed at which organizations have grown in the last ? five years have forced the procurement staff to focus more on the operational aspect of procurement function more than the strategic objectives.The arrival of the year 2009 has changed all that. So what are the strategies that can be implemented to reduce supply costs? This article aims to provide some answers to this question. Spend Management team: The first step is to form a team within the organization with the sole objective to manage the procurement spend. This team should not only include individuals from within the organization but also suppliers and customers whenever required. The key roles and responsibilities for the team members and the objectives should be clearly defined. The organization should aim to create a permanent team with the strategic task of analyzing the annual spend and identifying new systems, processes and technologies to mange the procurement spend. Conduct Detailed Spend Analysis: The second and the most important step is to conduct a detailed spend analysis exercise. This would require extracting the procurement related data from the Enterprise Resource Planning systems – ERP (accounts payable module and the purchasing modules) to cleanse the data. The data extracted from the ERP’s usually requires a massive amount of cleaning or ‘ scrubbing ‘ in order to standardize the format of data to an internationally recognized nomenclature. The most commonly used nomenclature is called the UNSPSC or United Nations Specified Products and Services code. CPV or the common procurement vocabulary is another popular categorization structure. A spend visibility exercise, conducted properly, will be able to answer many questions related to the procurement spend , for example , questions like :*? ? ? ? ? ?  What is the organization buying and how much *? ? ? ? ? ?  Who are the suppliers to the organization?*? ? ? ? ? ?  What is the organization buying in what quantities from the suppliers?*? ? ? ? ? ?  Who?  are the top 20 key suppliers for the organizations and what materials do these suppliers provide*? ? ? ? ? ?  How many suppliers provide the same category of items or the same item to the organization?*? ? ? ? ? ?  Who are the main requesters for the various items that are been procured and how much is requested every year *? ? ? ? ? ?  Is there an opportunity to combine spend for a category and benefit from volume discounts?Analyze the spend data: Once you have a detailed insight into the spending habits of your organizations, the cost reduction team needs to start the analysis process to identify areas of opportunities for cost savings. You may be able to identify savings opportunities through *? ? ? ? ? ?  Supplier Rationalization (Supplier ‘right sizing’): The 80/20 rule can usually be applied to the supplier base of most organizations. More than 80% of the procurement spend is usually procured from less than 20% of the suppliers. This is certainly true for organizations based in the middleeast. However, there is usually a huge list of many other suppliers which supply less than 20% of the total annual procurement spend. Organizations need to identify ways to reduce or ‘right size ‘ the supplier base by standardizing the products being procured and by reducing off-contract or maverick buying. Standardization alone will help organizations shave a mot from their annual procurement spend.? *? ? ? ? ? ?  Reduce maverick buying (off – contract buying): One of the biggest challenge for organizations in this region is off- contract or maverick buying by members of staff which are not part of the procurement team. It has been observed that sometimes around 50% of the items procured are from non-contracted suppliers (without the involvement of the procurement team) and usually at a 15- 20 % higher price than the price negotiated with the contracted suppliers. ? ? ? *? ? ? ? ? ?  Product Standardization: Another important step to reduce the supplier base and save cost is to standardize on the products being procured by the organization. A good example would be a photocopier machine where sometimes the same organizations may procure 5 to 6 different brands of photocopiers which means that the organization is not availing volume discounts and the company is paying more to deal with 5 to 6 different suppliers and is also spending more time to manage the service contracts with the same suppliers.? *? ? ? ? ? ?  Volume Leveraging: As mentioned above companies do lose the benefit of volume discounts when the products are not standardized and the products and services are being bought from many different sources. Companies can avail discounts of up to 8- 10 % more in certain categories due to volume leveraging? ? *? ? ? ? ? ?  Purchase price variance between locations: Spend visibility provides a detailed insight into the prices being paid by the buyers at different locations for the same category. It has been observed sometimes that the same supplier might be delivering the same product with the same specifications to different locations at different prices. In a consulting assignment for one chain of hotels in UAE, it was observed that the hotel chain could potentially save upto AED 4 million by simply bringing all the prices to lowest level offered by the same supplier.Spend visibility exercise allows organization to truly analyze the annual procurement spend to identify categories of spend ripe for cost savings oppurunities. As far as the major categories sourced by the organization, the next goal is to bring as many items /categories under contractual agreements with the suppliers and to give access to individuals in the organization to the items contracted so that the requests for the items can be raised as and when required as per the terms and conditions of the contract.The next step is to convert the opportunities indentified during the spend analysis process into real savings for the company. The first step to achieve this objective is to agree on the following: *? ? ? ? ? ?  Identify the items/categories to be contracted*? ? ? ? ? ?  Establish the quantities required based on historical data as well as the expected demand*? ? ? ? ? ?  Finalize the specifications and other details ( delivery , payment terms etc )*? ? ? ? ? ?  Identify a competitive bidding platform ( esourcing platform )?  to invite all suppliers to bid for the items to be sourcedThe last point mentioned above or the use of the esourcing technology to bring suppliers for the Reverse Auction in a competitive bidding platform is perhaps the most important of all steps. eSourcing technologies allow buyers to create what is a called a ‘reverse auction’. A reverse auction (also called procurement auction, e-auction, sourcing event, e-sourcing or eRA) is a tool used in B2B (business-to-business) procurement. It is a type of auction with the primary objective to drive purchase prices downward. In an auction (also known as a forward auction), buyers compete to obtain a goods or a service. In a reverse auction, suppliers compete to win business.Organizations in the region can use the esourcing technologies offered by Tejari to allow suppliers to bid in a competitive environment. Tejari is the eight largest sourcing platform in the world and the biggest in the MENA and Asia Pacific region with buyers and suppliers based in more than 55 countries of the world.By using an esourcing platform like Tejari organizations can expect to save up to 10 – 15 % of their annual procurement spend, however the savings percentage for each category varies from one organization to the other.This is the time for organizations to use the power of technologies to reduce cost but technologies alone may not help if spend visibility is not available.


It can be very stressfull time when relocating to a new country especially if its a totally new culture and system. I know as I have been through it myself, and you know I am still learning even after being here three years!!

So I decided that it would be helpfull to set up a relocation service which would give advice on personal and business relocation. This includes:

Company set-up / relocation both in Dubai and all UAE Free Zones
Sourcing a local sponsor / partner (where necessary)
Secretarial and PA services
Hotel / Serviced Apartment reservations for yourselves on arrival
Visa assistance for yourselves on arrival and for business colleagues visiting
Assisting with legal and accounting procedures
Setting up Corporate Bank Account
Setting up Corporate PO Box
IT services
Printing: business cards and letterheads
Travel assistance: booking flights, car hire etc.
Recruiting Office Staff
Processing Residency Visas and medicals for all Company Owners, Directors and employees
Invitation to meetings and events to help you develop your business network in Dubai

Plus under the personal relocation we can offer everything you need from School search ,accomodation, to a full orientation of Dubai and just about anything.

I wish I had something like this when I first came, it would have made tasks easier and we would have had a better standard of life in a quicker time, but as they say we all learn from experience.

So if anyone needs any advice or service please contact me, we have a whole team of people ready to help.


GSM Mobile Forum

The GSM Forum for all infomation about GSM phones, hardware and software related issues and requirements. How to remove simlock or how to flash your phone.

Pakistani Drivers cause most accidents in UAE

According to police figures, Pakistani drivers caused the maximum number of accidents for the second consecutive year in Dubai. They were accused of causing 95 fatal accidents in 2008 compared to 83 in 2007. This was followed by Indians who caused 63 fatal accidents last year, compared to 81 in 2007. Emiratis committed 42 accidents last year compared to 57 in 2007.The number of people killed in road accidents reduced to 294 last year compared to 332 in 2007.

Indian expatriates topped the list of people killed in road accidents for the second consecutive year. Some 107 Indians were killed last year compared to 128 in 2007 followed by 56 Pakistanis killed last year compared to 57 the previous year. However, the number of Bangladeshis killed last year increased to 23 as compared to 16 in 2007.

There are more than 900,000 registered vehicles in Dubai while more than 1.3 million vehicles use the Dubai roads every day. Indians topped the list of population in Dubai followed by Pakistanis. Dubai has a population of 1.7 million.

Emirates Road remained the most dangerous road as 46 people were killed in accidents on this road compared to 67 the year before.

On the Shaikh Zayed Road, the number of road accidents fell by almost 50 per cent and some 24 people were killed last year compared to 54 in 2007.

Commenting on the reduced number of accidents in 2008, an official at the Dubai Roads and Transport Authority (RTA) said that improved road network, more cameras and strict policing have paid off. “Strict measures, increased fines for traffic violation” and awareness drives in coordination with the police have helped reduce accidents, he said.

Pakistan Blog

Volunteer for Dubai Food Festival

Dubai Food festival will start from 1st Feb to 14th feb they need volunteers If you would like to be involved in the exciting process of publicizing, or helping on the days of the Festival, please contact us! Many volunteers are needed for a wide variety of tasks. Please contact Sriram:

Guiness World Record Attempt

An attempt of breaking a world record on the 13th Feb 2009,the festival along with the ECG(Emirates Culinary Guild) will create a largest Dessert Buffet of total of 2009 different desserts.

About Dubai Food Festival? Dubai Travl & Tours