A Simple Question on Controllable Spend – Will Worrying Help?

A Simple Question on Controllable Spend – Will Worrying Help?

 

I was at a presentation last week and the speaker asked the audience this question: “Will worrying help you achieve your stated goals?”
CFOs and CPOs have plenty of things to worry about when it comes to controllable spend. Unfortunately worrying about a problem never solved it. For many organizations controlling spending in all areas seems like an insurmountable task.
Here are the biggest issues that senior executives have told me about this:

  • Information systems that don’t speak to each other and can’t be coded to allow sharing of key data
  • Determining verifiable savings is a cumbersome and lengthy task due to limitations in financial systems
  • Summary financial reporting and analysis obscures rather than identifies saving opportunities
  • Contract management data can’t be accessed or isn’t available on a company wide basis

There are also fundamental issues with spend owners and stakeholders:

  • Spend owners have developed offline methods to manage sourcing due to the cumbersome nature of existing sourcing tools and systems
  • Stakeholders provide weak specifications or change the specifications continually or submit requests too late in the process to allow effective and efficient sourcing events

The interesting part of this is that the same issues exist in Fortune 500 companies and privately held organizations. Size doesn’t seem to matter.
Here are some questions that will help you know where you can start fixing the problems so you can stop worrying about them.

  • What percentage of all sourcing events are controlled by procurement?
  • What percentage of controllable spend does this represent?
  • What modules in your sourcing systems are not being used at all or hardly at all?
  • How many sourcing events are controlled using Excel, Word, Google Docs, Email or other standalone systems?
  • What are the most common supplier complaints?
  • Is there a system in place to handle supplier corrective action items?
  • How many recommendations from suppliers, internal customers and service providers have not been implemented?
  • What spend categories have traditionally been over budget despite the attention of senior management?

I normally ask these same questions when I first meet with a prospective client. They provide me with a clear picture of the areas in sourcing and procurement where I can help improve the process
Action Step: What would be the next step if you want to stop worrying?
I would send these questions to every member of your sourcing team and require their response in a week or less. This information will help you identify the most important issues. Most change starts at the lowest level so giving users and collaborators better tools they will actually use will be a great place to start. Once you get rolling your sourcing group should be able to create a clear path to become more efficient and effective.
If your tools are making it a challenge to for your organization, we should chat.
EC Sourcing Group is one of the companies I represent because their tools have been created by dedicated and experienced sourcing professionals. They know the day-to-day challenges your team faces and have built their tools to solve them. If you want to know how, I invite you to request a demo or 30 minute discovery conversation so you can experience the platform, process, people, and tools. You can reach me at (973) 718-7071 x875. The call will be forwarded to my mobile phone if I am not in my office which is pretty likely.
Next week I will continue on this same theme so your organization can improve your bottom line.
If you would like to know more ways to reduce costs without changing the way you do business simply give me a call or send me an email with your contact information and the best time to reach you.
You Won’t Drift to Success©
Think about it.
Until Next Time, I Wish You Great Success in Your Business and in Your Life
Mike Jeffries