Speech by Minister John McGuinness, T.D., Minister for Trade and Commerce at Supplier Force Hosted Conference ‘Managing Costs in Turbulent Times’

19 November 2008

Thank you Declan. Good morning ladies and gentlemen. I am delighted to be with you today at a conference which is addressing one of the most critical issues facing our economy today.

One of the Government’s key goals is to support Irish business and in particular to continue to drive innovation and investment – it is young companies like Supplierforce who are the engine of the economy’s future growth. I’m delighted that Declan Kearney and his team are providing thought leadership on the issue of strategic procurement and cost management and supplying innovative solutions to help steer public and private sector organisations through the turbulent economic waters in which we find ourselves.

We are all well acquainted with the economic and fiscal challenges facing us in the current global economic climate. The environment has changed drastically over the past year, with unprecedented speed and severity. Therefore, we are in uncharted waters and I firmly believe that it is HOW we deal with this crisis that will determine our economic health when we emerge on the other side.

Managing costs has become more critical than ever, as a company’s financial stability could well depend on highly effective and pro-active implementation of cost containment measures. Procurement leaders from the public sector, indigenous companies and multinational corporations across the island of Ireland now have a vital role to play in addressing these challenges and have a unique opportunity to make a strategic contribution to their organisations.

From the Supplierforce survey it is clear that cost containment is the major challenge for the vast majority of business leaders at the moment. When times get tougher the automatic reaction can be to focus only on costs, which can impact on innovation and overall profitability. International research^[1] has shown that by pro-actively managing an organisation’s supply base, procurement leaders can deliver considerable gains to the bottom line without necessarily impacting service delivery and product quality. The Government is committed to helping companies through these tougher times and we support any measures and initiatives that will help Ireland Inc weather the storm.

Looking at the contributors and delegates to today’s conference, they are from both the private and public sector, reflecting that this challenge is universal. From a public sector perspective, I am particularly interested to learn more about Peterborough City Council’s innovative solution to enhance services while continuing to keep council taxes low. This is the critical point – enhancing services while keeping costs in check. From a private sector perspective, it will be equally interesting to hear from Glanbia’s Group Purchasing Director on how their international business is continuing to innovate and succeed in the current climate.

Government is committed to driving significant savings in the public sector. However, we are at the same time committed to delivering optimum services to the citizen – the challenge is to find the balance between the two. If we wish to continue to restore competitiveness and to support the growth of the broader economy, we must ensure that our commitment to costs containment in the public service is ongoing, innovative and intensified.

Innovation is the byword of the moment – unless we bring new thinking to addressing issues that we never faced before we will fail. It is for this reason that the Government is committed to supporting private sector innovation while ensuring that the public sector provides responsive and efficient high quality, cost effective public services. We have set aggressive fiscal goals, including achieving overall savings of €440 million this year and €1 billion in 2009 as a critical step towards addressing the emerging difficult fiscal position. Quality of service delivery to the citizen is central to the work of the public service at all levels. As the Taoiseach has said, the modernisation process needs to deliver results that are clear, useful and verifiable to the user.

It is for this reason that solutions and innovative thinking on strategic procurement and cost containment offered by companies like Supplierforce are critical, as well as their recognition that managing suppliers is a key element of cost containment and innovation.

Following publication of the OECD review, the Taoiseach announced the establishment of a Task Force to develop an Action Plan for the Public Service. The Task Force was asked to prepare a comprehensive framework for renewal of the Public Service and those recommendations are currently being considered by the Government.

The Task Force is completing its work in significantly different circumstances from those that existed when the OECD began its review. The challenge now facing the Public Service is not just to build on past performance but also to face new and future financial realities. 

The Department of Finance has been given responsibility for a major reform of procurement management in the Public Service through the National Public Procurement Policy Unit. Measures to transform the management of procurement across the Public Service are in train and will yield better value for money as well as cost savings.

In having to deal with a sustained period of volatility in global commodity markets, the private sector has for many years recognised the strategic role of the procurement function. This has led to the appointments of heads of procurement to executive level positions together with an increase in adoption of cost-saving technology solutions. In fact, research shows that the higher the investment in procurement technology and staff the higher the returns delivered by the procurement function. Strategic procurement functions invest more than twice as much as transaction functions while delivering 2.5 times the return. The task now facing the Public Service is an equally formidable one and there is a lot we can learn from private sector procurement innovation.

Strategic vision and execution from our Public Service procurement leaders will form critical elements of this process, to ensure its success. The challenge is to exact major procurement reform, while maintaining a heavy focus on delivery of quality services. Innovative thinking is critical to this approach and it is by adopting new technologies and solutions that we can achieve that balance.

The Government is fully behind all these initiatives to reform the public service. I applaud the efforts of this gathering to bring together thought leadership and collaborative efforts from both private and public sectors to face the challenges that these difficult and challenging economic times bring.

My Department and its Agencies will play a vital role in working through the current economic circumstances and in making sure that both the public and private sectors are well positioned to reap the benefits that will undoubtedly arise when the situation improves in the future.

Today’s conference will offer invaluable insights and learnings from international experts as well as domestic organisations who have already engaged in some of these measures – I look forward to seeing the positive outcomes that I trust you will take away from the conference.

Thank you

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