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Delivering Added Value to Charities with Cost-effective Procurement

Updated: Mar 23, 2023

Bringing together individuals with a desire to make a difference in the world, charities play an important role in society, creating value for the direct recipients of charitable activities or services, as well as members of the public, and often delivering life-saving projects.

Most charities rely on public donations to continue to benefit vulnerable communities worldwide. However, much like businesses and other types of organisations, charities deal with substantial running and operational costs, with a significant portion of their budget being dedicated to purchasing the many services and products required to bring a project to fruition.

With charities spending an estimated £20bn on goods and services, the procurement industry should focus its efforts on generating extra value for these organisations, enabling them to do more with the budget available to them.

However, charity procurement requires a tailored approach that doesn’t simply focus on financial gain.

The importance of transparency and traceability

“There is much more to effective, quality procurement services than reducing costs,” comments Shameet Thakkar, founder and managing director of Unimed Procurement Services (Unimed).

“When it comes to charitable activity, there’s no room for compromise on the quality or safety of the products and services supplied, or ambiguity regarding how a charity’s money is utilised.

“Corruption has long been a topic of concern in the procurement industry, and charities simply can’t afford to be victims, especially when the successful completion of a humanitarian relief project, for instance, depends on the safe and successful procurement of certain items,” adds Shameet.

With ethicality, security and traceability being so vital for the continued wellbeing and success of charities, it is more important than ever that their procurement partners focus on providing solutions that eliminate potential related risks.

More and more individuals are concerned about where exactly their money is going when they make a donation, and this is intrinsically linked with charities’ relationships with their external suppliers and how they operate.

In order for charities to be transparent with the public, and adhere to high standards of quality and safety within their operations, the companies they work with need to uphold the same values, meaning there’s an added layer of responsibility sitting on the shoulders of procurement agencies.

How procurement outsourcing can help charities

“Outsourcing procurement functions is a great way to reduce operational expenses and help charities save costs, but it is vital that this is done in way that directly benefits the charity itself,” says Shameet.

“Procurement outsourcing comes with an added layer of expertise, and a valuable quality assurance wrapper, which can be particularly beneficial for small or medium-sized charities that lack adequate resources, or that mainly depend on volunteers.”

Some charitable organisations may be forced to rely on a single individual to manage all procurement operations, and for more complex projects, this is likely to require dealing with multiple companies, which maximises risks, and translates to extra costs.

Procurement outsourcing offers a complete, cost-effective solution, providing the skills and expertise required to streamline operations while alleviating the pressure of dealing with complicated negotiation processes involving several separate entities.

If working with the right procurement partners can provide charities with ethical, transparent and expert procurement strategies and approaches, what else should procurement agencies do to deliver added value?

The benefits of a Gainshare procurement model

Gainsharing sees the supplier provide added value when sourcing products, with the proceeds being shared with the contractor.

“Other procurement models such as fee-for-service may cause charities to face substantial upfront costs, and as both parties are required to follow pre-defined terms, there’s no room for potential savings to be generated by suppliers,” says Shameet.

“Gainsharing, on the other hand, is a partnership approach. It is first and foremost about collaboration between two entities. And when it comes to charities, generating additional money as part of this model becomes a matter of importance.”

Most charities have a limited budget for each project they deliver, meaning that the cost savings created thanks to gainshare procurement are particularly valuable, enabling them to launch more life-changing initiatives and help more individuals.

“Establishing KPIs and service level agreements from the start can be particularly helpful in ensuring all objectives are met, and that the generation of extra savings has not impacted quality or the timely delivery of products,” says Shameet.

“Effective communication should be maintained throughout the entire process, to ensure expectations are managed and that the presence of potential issues is relayed within realistic time frames, allowing for the right solutions to be implemented. As always, prioritising transparency and traceability mitigates risks on all fronts,” he adds.

Avoiding complacency: why we should change our mindset

When operating with an ethical, transparent approach, a gainshare procurement model can provide value in ways other than financial gain, and not just for charities.

If procurement companies are incentivised to do more than simply what they are required to do, this could inspire effective, deep-seated change within the procurement industry, changing complacent and ineffective practices.

“Shaking up the procurement model and changing the focus within the industry is quite simply a necessity. Many have become complacent – they just don’t want to take on the extra pressure. But it’s this type of institutional change that paves the way for valuable entities such as charities to take on even more life-changing work.”

To learn more about ethical gainshare procurement, or work with a renowned global supplier of healthcare products, get in touch with Unimed now.

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