The limping EBITDA Budget

Written by  Itbid Team on 23 June 2015
It’s budget time. The meetings rooms and spread sheets are on fire. For one more year, all departments are busy and work in a hurry to get the budget ready. But budget describe, again, a limping EBITDA. It seems that the Golden Rule of the crisis (“My God, My God, let me I stay as I am”) affects how we approach the undoubted contributions that the Purchasing department can obtain for the business.

 

 

And however, for the Purchasing Department, making budgets should be a great opportunity to act decisively on EBITDA, and to gain full weight in decision-making. To do this, we need to act decisively on costs – forget about raising or decreasing only a few tenths or a point.

If you do not have an objective like “the savings in purchasing will contribute by adding 5 points to EBITDA next year “, you, as a buyer or, from bad to worse, as CPO, you have a problem: what value are you providing to your company? Will you act as locomotive or as passenger?

Here are some indicators about your purchasing function:

  • “Most of our time are dedicated to make or claim orders and check the balancing of the orders and invoices”. Your company does not find real strategic value in your Department – so Purchasing is relegated to purely administrative aspects and others relevant matters.
  • “We use ERP for order processing; we have other needs covered with Excel and other office tools.” You are passing up opportunities for improvement in transparency, repeatability, traceability and documentation that eSourcing tools allow, and the excellent level of savings in some categories that real-time competition can produce by using reverse auctions.
  • “In my company, many departments and users are responsible for their own purchases, because are very specific and technical”. This culture of decentralized purchasing complicates not only the knowledge of real or committed expenses, but put on the front of negotiations with suppliers to the user or internal client himself, which may invalidate the whole negotiation.
  • “When we can calculate and communicate the savings, users and internal clients discuss about it. So, contributions of the Purchasing department are always put into question or seem fuzzy”. The methodology that you are using is not correct, has been changed or has not been previously agreed with the user on a reasonably way. The lack of uniformity undermines the credibility of your achievements, when your method of capturing both savings and other contributions to the business must be irrefutable.

At ITBID we can modulate our technology, expertise and services in order to optimize your purchases and maximize your savings. You’re still in time: Do you prefer another year of limping EBITDA and poor recognition for your work? Or do you prefer to contact ITBID to help your EBITDA to take off (and you also)?

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