There was mirth in the The Sun last week when they revealed that the MOD were buying lightbulbs for £22.51, that cost just 65p from any DIY store.
The MOD and all government departments will be buying thousands of different items every day, so how can they ensure good value? In most companies, where profit is dependent on minimising cost, the Enterprise Management Systems (EMS) control inventory, financial transactions, billing, and accounting. In a revolution that happened in most companies around two decades ago, systems that just performed one function e.g. invoicing were brought together by systems like SAP to provide an automated back office.
It was about this time that the term “back office” came into regular business parlance, the term is derived from the layout of early companies, where the front office would be customer facing and the back office would house manufacturing, marketing and administration.
In large organisations, continents will often separate the front and back office functions, but control is maintained via the EMS. These systems are the glue that bind global corporations together, and have grown to provide a humming backbone which monitors every transaction, consolidates every record, bills every customer, pays every supplier, and reports every variance. In many companies it is the efficiency of their back office, and the quality of information derived from this mass of transactional data that enables them to squeeze fractions of a percentage point margin over their competitors and add millions of pounds to their bottom line.
As the Government looks to reduce the deficit, ministers are being asked to explain where the cuts in their department will be coming from. A familiar response is along the lines of “We are protecting our front line services”, but with the added proviso ”this will unfortunately mean cutting the back office”. Few ministers have any business knowledge, Liam Fox at the MOD was a GP prior to entering government. Few understand what the back office means and what it does. Few comprehend that automating the back office has been a major driver to increasing corporate profitability over the past ten years.
By all means cut the back office, but it has to be automated and the government needs to join up, so that local systems do not just handle thousands of transactions but billions. For example there are 43 police forces in England and Wales, all procure the same merchandise, all bill the same suppliers. Dont just cut, consolidate costs. There are hundreds of councils across the country all with the same business model. Dont just cut, cooperate on costs. There are huge sprawling monolithic departments of state with massive bureaucracies. Dont just cut, control costs.
Like this:
Be the first to like this post.