New savings for a more pennywise procurement

Organisations operating in the manufacturing and industrial sector are facing a perfect storm. Years of rampant inflation, supply shortages as a result of conflict and disruption to trade routes, and faltering demand have made this one of the most challenging periods in memory.

Now, the sector is having to cope with the uncertainty stemming from the US’s introduction of trade tariffs, which could affect demand from one of its main export markets as well as the introduction of higher National Insurance contributions for employees. It’s perhaps no surprise, then, that UK manufacturing output fell by 7 per cent in the first three months of 2025, according to data from industry body Make UK.

For those working in procurement, this has only increased the pressure to manage costs, mitigating price increases where they are unavoidable and reducing costs elsewhere. A key focus will be to bring more spend under management, so procurement can effectively control what is spent and by who, putting in place boundaries around both spend value and supplier credentials.

It’s also led to a greater focus on supplier risk, with 33 per cent of senior leaders and 32 per cent of decision-makers identifying supply chain disruptions or delays as the most likely factor to pose organisational challenges or risks in the next two years, according to Amazon Business’s 2025 State of Procurement Report. Yet at the same time procurement itself is under pressure; almost half (49 per cent) of UK buyers report efficiency and complexity as their biggest challenge.

As industrial firms seek new sources of savings, a growing area of focus for those in procurement is likely to be non-core spend categories, often known as “tail-end spend”. In the industrial space, this may involve maintenance, repair and operations (MRO) items or personal protective equipment (PPE).

But it also includes other spend that is not central to the organisation’s core product but is a vital part of running any business, whether that’s IT or technology, office supplies and stationery, furniture or consumables such as toiletries.

Such spend has often been ignored by procurement, deemed too time or resource-consuming to tackle, particularly when compared with the higher-value spend categories where more tangible savings can be found.

But such indirect spend categories can add up to significant amounts, as well as bringing more spend under management and reducing the potential for supply shortages. The rise of online marketplaces such as Amazon Business means procurement teams can empower internal customers to purchase items while still complying with company buying policy, either using a company account or as a punchout option from e-procurement software.

The Workplace Depot is one organisation that has benefited. It initially started working with Amazon Business as a seller but also saw the potential to get its spend under control. It now buys a range of items, from office equipment and janitorial supplies. “If it’s needed to keep our workplace efficient and safe, the chances are we’re buying it through Amazon Business,” says Annabelle Earps, Digital PR Manager.

As well as benefiting from lower prices, this has helped the business get more control over its spend, meaning those in the procurement team know exactly what they’re spending on these categories and helping them to identify opportunities for efficiencies.

This is another priority for procurement: 34 per cent of senior leaders see improving reporting and analysis as an area they want to see teams spending more time on, the State of Procurement report suggests.

Organisations can also put in place more control over which suppliers they use, ensuring they meet pre-agreed criteria that help align with wider company policy.

According to the State of Procurement report, almost all (99 per cent) of organisations now have specific goals around environmental, social and governance (ESG) concerns, and two-thirds (66 per cent) of respondents in the UK say overarching ESG goals have increased in the past year. Four in 10 (80 per cent) have mandates to partner with certified sellers. The most common goals are suppliers that follow sustainable practices (61 per cent), local businesses (46 per cent) or certified small businesses (44 per cent).

Purchasing through a marketplace can also help drive efficiencies in other areas. Using one platform means reduced paperwork, and no need to raise individual purchase orders or invoices. This can also help with legal compliance, providing a clear audit trail.

Procurement organisations in the industrial sector also stand to benefit from the use of new technology, including artificial intelligence (AI). Almost one in four (38 per cent) procurement professionals intend to use AI to help forecast demand in the next three years, and the same figure are looking to deploy it to undertake spend analysis and automate procurement processes.

Originally published on The Manufacturer.