Many procurement departments lack the resources, time and technical expertise to thoroughly consolidate and analyze their spend data which results in missed savings opportunities throughout their organization. Mapping spend data provides the basis for identifying opportunities and risks, and is the foundation for cost reduction initiatives, improving the value you obtain from the supply base.
- Who is spending and on what?
- Which suppliers supply to different parts of the business?
- Which departments buy the same goods and services?
- What portion of your spend is with your top suppliers?
- How many transactions do you process and what are the associated costs?
The opportunity for significant savings sits across the organization. An effective cost reduction program considers the full range of procurement levers across an integrated view of the strategic procurement process:
- Demand: is there alignment between your wants and needs?
- Source: are you using a category planning process to drive a more holistic view of spend? Do you have an effective supplier management process that appropriately aligns risk, effort and reward? Do you have enterprise visibility and control over all your contracts?
- Fulfillment: have you ensured your P2P processes enable compliance and risk mitigation?
Just when you thought you have done all you could to find incremental savings, there is more you can do! The next step is to make the connection between complex categories and the business’ charter to reduce the total cost of ownership for your most strategic areas of spend. By having the visibility and flexibility to make choices based on the best allocations of your business, balancing suppliers’ pricing and capabilities with buyer business constraints and preferences, you can generate incremental and ongoing savings.
In order to sustain your cost efficiency efforts, you need to have end to end visibility and management of the activities at every step of the procurement process:
- You need to track all savings from the initial idea to final benefit sign-off
- Know the total lifetime value of your suppliers
- Showcase value by linking performance to key financial indicators