UK Privatization: Its Impact on Procurement

This study is concerned with changes in procurement and supply chain management in UK privatized companies. In most cases, privatization requires the organization to develop a completely new approach. This is because of the change in ownership and the new competitive environment into which the company moves. Part of this reassessment of the business by senior management can be expected to include procurement. The paper focuses on the nature and direction of the changes in procurement associated with privatization, based on research into the privatized sector in Britain. The method adopted involves an extensive questionnaire completed by 28 major companies privatized in the UK, followed up by interviews with twelve of these companies. Questions centre on the following key areas: changes in the structure of procurement, procurement strategy, the role and profile of procurement within the company, attitudes to outsourcing and supplier performance and changes in approach to assessing the performance of the procurement function. Our results indicate extensive change. Although cost reduction is often a driver of these changes, as the companies strive to reduce costs to meet City expectations and best practice in the private sector, another consideration is the contribution that procurement can make to the overall strategy of the company, so as to gain and maintain competitive advantage.