DHL Launches Integrated Procurement Outsourcing to Help Governments Slash Deficits and Businesses Drive Down Costs

DHL Launches Integrated Procurement Outsourcing to Help Governments Slash Deficits and Businesses Drive Down Costs

LONDON--(BUSINESS WIRE)--DHL, the world’s leading logistics group, has today launched a procurement outsourcing service designed to help public and private sector organisations around the world achieve substantial cost-savings through transformational sourcing of products and services. It will work in concert with DHL’s other service capabilities to create new integrated services to further deliver value to customers.

“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 £150bn worth of “long-tail”
.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 billion 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 £100m 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.

Roger West said: “This is excellent news for our customers in both the public and private sectors who are looking afresh at how they can further reduce costs and deliver greater service efficiencies.

“Many businesses in the private sector will be quick to grasp the competitive benefits of a ‘one-stop’ procurement and delivery process from our company, and we hope to extend our well known and trusted logistics services to integrate procurement of some of the things that we move. This will give our customers procurement capacity to focus on other opportunity areas in their businesses”.

“Our success working with the public sector in the UK demonstrates the massive scope that exists to harness procurement expertise to help reduce public sector deficits. Given the significant costs of public sector borrowing, the private sector is well positioned to help Governments achieve rapid reductions in public expenditure without risking frontline public services - an outcome that has as much resonance in the UK as it does in other markets, especially in Southern Europe and even in the US. National and local governments are starting to appreciate the sheer strength of their buying power, and our new proposition will rapidly and effectively transform that power into substantial savings. With many countries having to commit upwards of 25% of public spending to finance borrowing costs, it makes no sense to wait for the necessary culture change and cross-departmental consensus required for the public sector to create their own specialist procurement expertise.”

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.

Mr West added: “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 £150bn 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.”

DHL – The Logistics company for the world

DHL is the global market leader in the logistics industry and “The Logistics company for the world”. DHL commits its expertise in international express, air and ocean freight, road and rail transportation, contract logistics and international mail services to its customers. A global network composed of more than 220 countries and territories and about 300,000 employees worldwide offers customers superior service quality and local knowledge to satisfy their supply chain requirements. DHL accepts its social responsibility by supporting climate protection, disaster management and education.

DHL is part of Deutsche Post DHL. The Group generated revenue of more than 46 billion euros in 2009.