DHL launches integrated procurement outsourcing to help governments
The unit is designed to help public and private sector organisations around the world achieve substantial cost-savings through transformational sourcing of products and services. The new team, which will be based in the UK, will be headed by Roger West, former Procurement Director of NHS Supply Chain (NHSSC), a DHL business procurement unit created in 2006 under contract to the UK Department of Health tasked with delivering £1 bn of savings to the National Health Service.
The new unit – called DHL Procurement Outsourcing – aims to work closely with both the public and private sectors to help drive down costs at a time when the economic background is particularly challenging. DHL calculate their specialist expertise and grasp of public procurement has already saved the UK National Health Service more than £100 m in the past three years and has performed ahead of expectations. DHL expects rapidly to build business in other countries from their successful UK experience, and especially the replication of their ‘direct from manufacturer’ sourcing programme.
The broader macro-economic background in the UK is fraught. Total public sector debt of £890 billion is giving rise to annual interest payments of £47 billion, with the current deficit standing at £167 billion. Procurement is acknowledged to have a role in reducing Government spending, but only £80 billion from a total of £660 billion is outsourced. A number of industry commentators including the Institute of Directors consider that over £25 billion worth of procurement benefits can be achieved through the transformation of procurement practices. Part of the challenge for public sector procurement is that it is so big and yet so broad. Central procurement strategies will need to deliver the larger lumps of savings, such as in energy, telecoms, and travel, but there remains a “long-tail” of purchases that DHL are aiming to target through their new proposition.
Roger West said: “Central procurement programmes will only really effectively target some 25% of Government spend. In the case of the UK this would still leave in the region of £150 bn worth of “long-tail” purchasing savings that could be delivered at lower cost from more intelligent procurement outsourcing. Governments need to set aside ideological or political differences and ally with the private sector in using procurement to help tackle the debt crisis.”