The Procurement Act 2023: Contract thresholds explained

At the heart of these efforts lies the goal to not only safeguard the financial health of organisations but also to ensure that they can thrive amidst adversity.

Getting control of spend is more than just counting the pennies or keeping the books balanced. It's about turning financial insights into strategic advantages. By prioritising the needs and perspectives of businesses, we recognise that effective spend control is a lifeline in times of economic instability. It empowers companies to make informed decisions, optimise operations, and stay competitive. For finance and procurement professionals, achieving control over spend management means navigating the current economic pressures with confidence and clarity.

In this blog we summarise the highlights from our recent webinar in our ‘Getting control of spend’ series, where Mark Reddy, Global director of growth for Finance, Spend and Governance at Advanced, was joined by Dionne Loughrey (Head of Group Procurement at DFS), and Natasha Brown, (Group Procurement Director at Harland and Wolff).

What is control?

Getting control of spend is all-encompassing, it is not just focussed on cost. How does getting control impact the entire journey of your procurement transformation? What are the baby steps organisations must take to lay strong foundations for success?

Mark Reddy opened up this section of our webinar by defining the intent of this series, “we will be exploring the fundamentals, or procurement vitals, that anchor how you get control of spend” which is a concept that Advanced are deeply committed to. We are committed to this so that we can help our customers have better understanding of spend management, their own maturity scales, and how we, as a software provider, can help them prioritise their business needs to get control and continue their growth.

Natasha Brown defined getting control as visibility, “for me getting control of spend is getting visibility, understanding where money is being spend and why money is being spent, and then what is the governance around that”, then using that visibility to gain better business insights so that internal processes can be simplified and made more efficient, such as standardising suppliers and products.

Dionne Loughrey echoed many of Natasha’s points but summarised her definition as “you can’t control spend if you don’t understand it” as a fundamental starting point. “If you try to control it before you understand it, you will have a short journey”. Meaning you have to have awareness of your processes, your suppliers, your contracts, your payment terms, and your compliance, such as modern slavery agreements and ESG requirements in order to transform or control your procurement.

Procurement transformation experiences

With an understanding of what is meant by ‘control’, the conversation led on to Natasha and Dionne sharing a little about their own professional procurement transformation journey’s and what procurement capabilities they had to uncover at the beginning to help get control:

Dionne introduced her role at DFS as Head of Group Procurement, brought into the role around 2022 to transform the procurement department. Since then, she has been working hard to understand the history of procurement at DFS, the culture and the processes, so that she can appropriately develop a roadmap and strategy that will grow the business and it’s maturity.

Natasha explained how her organisation, Harland and Wolff, is an incredibly strong brand with 160 years of history and due to this has had quite a traditional set-up. The focus had previously been very transactional, working on short-term wins or immediate deliveries but, as Group Procurement Director, Natsha’s role is to shake things up and transform procurement as a function to enable them to work more collaboratively with suppliers, “to identify opportunities, to learn best practice from one another and to understand more around the layers of the supply chain”.

Data is the cornerstone

“You can’t manage what you can’t measure, and you can’t measure what you can’t see”, this statement from Mark Reddy solidifies why it is so important to increase visibility within your organisation. 

Procurement is so much more strategic than people may initially think, and it takes an immense amount of structure, control, and organisation. But quite often procurement teams are too stuck fighting fires to step back and assess what the necessary steps are for long-term stability and success. Natasha described this as “the analysis paralysis”, for not knowing where to start. That’s why modern technology can play such a vital role in managing this data and structuring it into a way that is easier to consume and share across an entire business, so that procurement teams and senior decision makers can draw strategic insights from this data in the most effective and reliable manner.

Mark described the three key stages of any data project as:

• Data coverage- what are the different points you need data on?
• Data completeness- Of these identified points, how many subfields of data coverage do you need?
• Data quality- Once you have the data coverage, you can start to build good data quality.

He then went on to explain why this measurement of data is key when businesses are trying to understand their ‘critical points’. He told a story about a company who he worked with that had invested their time and efforts into a well-known organisation and information service to gather and extract data on their business, which they loved! The problem was that one day they got served by their supplier because, unknowingly, they has passed a critical milestone in a contract that they weren’t measuring.

So, you must start by defining what the questions are that you want your data to answer and what your data cornerstones are such as, who are your suppliers? What are you spending? What do you need to know about your top 100 suppliers? What are your key contract dates?

 Define what you need to know and remember it is a process of constant improvement.

Understanding your own procurement journey 

Dionne mentions that when she started her procurement journey at DFS, to really understand their maturity and position, it was important to first understand what they were spending, what on and whom with. They used a third-party to help with this initial data gathering exercise which meant they went from being “unconsciously incompetent, to consciously incompetent”, undoubtedly a better position to be in if you want to fix things. Dionne strongly believes that “businesses should be data-led with their decision-making” especially when choosing which suppliers to partner with and to ensure they are held accountable with deadlines.

Natasha talks about how data was incredibly siloed when she first started her procurement transformation at Harland and Wolff, and sometimes it felt like they were “drowning in the sheer volume of data”, which can be very overwhelming. This data was therefore her first port of call when undertaking this challenge of transformation. She also goes on to talk about how Harland & Wolff have very strong quality control processes, due to the nature of their business, so they’ve really tried to tap into this quality control strength to guide their own maturity journey.

Looking ahead to the future and the changes that still need to be implemented to overcome some of these procurement journey challenges, Dionne stated that the people in her organisation would be one of her top priorities. She emphasised that helping the team become real business partners will help with their overall success and will mean everyone feels supported through this continued transformation. She also plans to invest in more technology as DFS are in the process of implementing a purchase order system. One more important priority for Dionne is really defining the processes and policies at DFS, to ensure they remain compliant.

She closed this section of the webinar with a powerful statement: “To control spend you have to understand it. Once you can control it, you can improve it, and then you can transform it”.

The role of AI in procurement

Before closing, there was one area of transformation that was left to be discussed. There is no doubt that AI is a hot topic that many businesses and professionals are talking about, but what are procurement and finance teams saying about it?

Mark raised some of the statistics that we found in our recent Annual Business Trends Report 2023/24, highlighting that just 17% of those that we spoke to working in procurement said they are now using AI. Suggesting that overall, finance and procurement professionals are showing more caution than some of the other sectors that we surveyed. We asked Dionne and Natasha why they thought this was and what their personal opinion was on the use of AI for procurement functions. The overall consensus was that AI does have the possibility to be a really great tool to aid productivity, efficiency and gather insights, but only when the data that you have is reliable and secure.

Dionne was clear on her stance with AI stating that yes, we should understand how it can help us be more efficient and how it can speed up activities that don’t add real value, but that “it’s only as good as the data you put in. Unless your spend data is cleansed, you won’t get good results from it”. Natasha explained that she has witnessed AI being used in great ways such as analysing the supply chain and boosting efficiency around how the best or most appropriate suppliers are identified. She also spoke about AI as an enabler, to get to an answer much quicker than it could be done manually, and how looking ahead to the future it could be used to draft purchase orders but made it clear that her organisation is not mature enough for that right now. Therefore, highlighting the importance that good things take time. It is imperative to ensure your foundations are laid properly and you have a clear understanding of your procurement vitals before you rush ahead and trust a tool that will not wave a magic wand for you. Mark reaffirmed this by leaving us with a thought- we will never replace relationship management and negotiation capabilities with AI. The power of human interaction will always be necessary.

Closing notes

When asked what advice they would give to someone listening who may be considering their own procurement transformation, Dionne and Natasha summarised their thoughts and left us with some closing notes. Dionne said, “there’s no need to reinvent the wheel, remember to do lots of listening, understand the business your working for, what their opportunities are and how you can help”.

Natasha tell us to “be curious, keep asking questions, keep learning, keep testing your hypotheses to make sure your understanding is correct, and enjoy your role!”

Learn more

At Advanced getting control of spend means fostering resilience, unlocking opportunities for innovation, and driving sustainable growth. In such turbulent times, the role of spend management cannot be overstated—it is, unequivocally, the backbone of organisational stability and success. To learn more about our Spend Management software you can visit our website: Spend Management software | Advanced (oneadvanced.com)

For more insights from our industry experts, watch the full webinar on demand here: https://lnkd.in/e88D z2GK