GNFR Unlock hidden value in your P&L

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The unfortunate consequence of businesses treating GNFR as something of a backwater, is that talented buyers often choose to move away from GNFR towards other roles with a higher profile Underinvestment in GNFR teams not only impacts the people, but also the way they operate. Best-in-class GNFR procurement teams will have clearly defined processes for interacting with suppliers and technology to support them optimise results. These tools provide the ability to work consistently, maximise savings and track benefits which in turn helps to mitigate risks and provide a clear cost-benefit for the team. When a major multi-channel retailer assembled and trained a new in-house GNFR procurement team, they were able to help the business deliver cost reduction worth £8m in their first 12 months, with average savings of 11% across the categories covered. In cases where a well-resourced GNFR team is in place, issues may still arise. Organisational structure and reporting lines can be problematic and in some cases serve to limit the remit of the GNFR team and the level of results achieved. Whether the GNFR team report into the CFO, Commercial Director, Procurement Director or Property Director, the relative influence of these stakeholders within the business will impact on the team’s ability to do a good job and gain senior support. Reporting lines and team structure can also compromise the scope and control of the GNFR team. Many businesses exclude certain spend categories from the remit of the GNFR team, often where they are seen to be of a “specialist” nature, such as media buying, purchase of shopfit equipment or IT service contracts. GNFR spend then becomes fragmented, often with reduced scrutiny and accountability for efficiency of spend. THE SAME BUT DIFFERENT Within retail, there appears to be very little cross-pollination of GNFR staff with their counterparts from other higher profile commercial functions, despite the clear crossover between the roles of buyer within GNFR and buyer within GFRS. More sharing of personnel, skills and processes would be advantageous to both sides as the typical areas of strength/focus are quite different and therefore complementary. For example, while GNFR buyers can be experienced in developing contractual terms, managing tenders and online auctions, their counterparts in GFRS are often more comfortable dealing with new supplier integration, off-invoice funding discussions and top-to-top negotiations (see Exhibit 3). Exhibit 3: GNFR buying team strengths Typical areas of strength within GNFR buying teams vs GFRS buying teams GNFR Contract Development Spend Analysis eProcurement Managing Tenders Policy & Governance GFRS Supplier Relationship Management Ad Hoc Negotiations Off Invoice Funding Multi-Party Negotiations Top-to-Top Supplier Discussions Source: Ivo GNFR/GFRS Buying - Ways of Working Study 2016 IMPROVE YOUR GNFR FOCUS Given the wide and varied range of potential issues mentioned, it is perhaps heartening to know that building an appropriate GNFR function or improving the effectiveness of an existing team can actually be quite straightforward. The steps outlined in Exhibit 4 can help improve the management of GNFR spend within your business. 4 | GNFR: UNLOCK HIDDEN VALUE IN YOUR P&L
Exhibit 4: Five steps to effective GNFR management 1 2 3 4 5 Understand the Spend Understand your GNFR spend profile and identify where the largest savings opportunities might be. Build the Team Assemble a high-quality and dedicated team of procurement specialists to manage GNFR within your business. Provide the Tools Provide the team with processes and technology to quickly assess spend and deliver results. Support the Team Develop clear reporting lines with board-level sponsorship, in order to create a profile for the team and a platform for their results. Avoid unnecessary exclusions from the team’s remit. Share Expertise Encourage movement between GNFR and GFRS buying teams to develop a versatile and commercial group of buyers over time. WHY NOW? There has never been a more urgent need to review GNFR spend and ensure costs are being carefully managed, especially if you answer “yes” to any of the questions in Exhibit 5. Exhibit 5 Question Yes No Is it some time since spend within the category was last reviewed/analysed? Is there a longstanding incumbent supplier? Has the level of spend changed significantly for any GNFR categories over recent years? Can your buying requirements and terms be clearly specified? Are there a group of alternative suppliers able to provide the goods/ services? Are price increases being proposed or are likely to be proposed by the incumbent supplier? Are changes to the current specification or requirement levels being considered? If you’ve answered YES to any of these questions, you should consider whether it is time to have another look at your GNFR spend. While the overall timeline for Brexit is now somewhat clearer, with Article 50 to be invoked by the end of March 2017, many of the implications of the leave vote in June are still to be realised. However, the impact on currency markets has been immediate. Adverse exchange rates will not only put retailers’ gross margin under pressure, but will also adversely affect the work of any GNFR team dealing with suppliers overseas. As contracts and pricing agreements come to an end, renegotiations will be conducted against a backdrop of economic uncertainty and the weakened position of sterling versus the dollar and the euro. Continuing to ignore GNFR spend categories could leave companies sleep-walking into higher prices, with costs spiralling out of control. v 5 | GNFR: UNLOCK HIDDEN VALUE IN YOUR P&L
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