Taking the 'bus' saves Home Group £50,000 in six months
Published by Max Salsbury for 24dash.com in Housing
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After setting itself a challenge to get value for money from all its purchases, Home Group has saved £50,000 in six months.
Home Group is one of the UK’s largest housing associations, employing more than 4,000 colleagues and working with over 200 local authorities nationally to house and support more than 120,000 people a year.
Home Group said it believed it was receiving accurate prices from approved framework suppliers via competitive tenders on a monthly basis but was less clear on impromptu purchases from non-approved suppliers.
The housing association wanted the ability to review and build a business case to consolidate off-contract spend. This would help reduce the cost of unplanned procurement and achieve the same savings it was receiving on planned purchases, which tended to be below the distribution channel price in most cases. The business recognised it was being penalised by suppliers for impromptu buys.
Laura Davidson, Home Group IS supplier relationship manager, said: "We felt we were getting a good price through our monthly procurement framework but the ad hoc purchases from non-approved suppliers were costing on average 21% more and up to 350% for individual purchases. This had to change."
Home Group adopted the IT Edition of KnowledgeBus, a CIPS accredited online application that automates benchmarking of purchases against daily trade guide price and stock levels on over 150,000 'live' products from more than 2,500 manufacturers. A spend analysis was conducted on a sample of Home Group’s purchases, which identified areas for improvement on ad hoc purchases with non-approved suppliers.
Davidson said: "We unearthed supplier sales tactics such as inflating margins for high-volume, low-value consumables whilst appearing to provide competitive pricing on low-volume, high-value equipment. For example, we found mark-ups of approximately 60% on laptop bags but minimal mark-ups on laptops. On smaller items, we have seen suppliers asking for mark-ups in excess of 100%. This is something we would not have realised without having KnowledgeBus in place."
Home Group said it is now able to cap commercial agreements with suppliers stipulating a mark-up of cost plus 3% on all purchases.
Laura said: "Our cost avoidance figures show that Home Group saved £50,000 over six months as a result of using KnowledgeBus and we are likely to save more than £80,000 over the course of the year."