There’s no doubt 2010 was a school of hard knocks for many retailers and consumer sentiment suggests 2011 will be another tough year.

There’s no doubt 2010 was a school of hard knocks for many retailers and consumer sentiment suggests 2011 will be another tough year.

Experience shows that Government cuts are likely to impact consumer confidence, making it harder to maintain margins and grow sales.

But I remain optimistic about 2011. In my world - procurement of indirects - we’ll be on our toes and that’s no bad thing. In this industry we may be great at negotiating wholesale prices on goods for resale but when there’s no more margin to find and sales are flat or falling, you have to look at all aspects of your costs.

Without a top line growth climate, success (or survival) in 2011 requires that as an industry we must ensure that operating costs are managed as tightly as core resale goods.

Of course we still need to invest in growth for the long term and be ready to take market share, but as we do so stepping up operational efficiency is imperative.

As many of you will know, indirects cost the industry hundreds of millions but cost efficiency here is not as well controlled. The myriad goods and services that keep store doors open and customers served still offer opportunities for bottom line growth and must be leveraged.

Five years ago indirect purchasing was a serious retail backwater. That’s when Dixons invested in strategic sourcing, quickly adding millions to the bottom line. Half a decade on the effects have quadrupled, but not stopped.

We took purchasing expertise from outside retail. Manufacturing industry sourcing and value engineering skills enabled us to streamline without impacting end service. Today ex-Nissan, Ford, Caterpillar and Accenture skills reside in our team.

But our difference to manufacturing is of course rate of change. This requires substantial and quick savings and banking of the benefit before things move on. Aiming high matters too; focusing on big costs with great margin for improvement. Clear visibility of spending is also essential in expediting opportunities and measuring savings potential against current spend quickly.

To manage key indirect purchasing areas we use the Wax Digital web3 eProcurement platform. This helps us to analyse spend data, establish benchmarks for improvement and then manage spend against new contracts.

It helps us with frequent incremental requisitions against very large contracts. With no 12 months in retail the same as the last you need technology platforms like this to keep abreast of changing purchasing needs and controlling spend.

At the end of the day, indirect purchasing efficiency in retail goes beyond simple cost reduction to drive service optimisation. Indirects are intrinsically linked to the retail front line, not languishing in the back office. So, as we begin 2011 make it one of your resolutions. Perhaps it’s more a case of brave new world than happy new year.

Rob Douglas Chief Procurement Officer, Dixons Retail