Are the stakeholders in your company protecting their turf instead of actively controlling spend?
I believe most executives with profit responsibility are smart.
As an entrepreneur who started several organizations, I focused on profitable sales growth as my number one goal.
Given the choice, I invested in processes that would drive sales over ones that controlled costs.
I also wanted to control costs, but it was always more exciting to generate new business.
If you are a baseball fan, you probably appreciate a double play, but home runs are much more likely to get people cheering widely.
What percent of spend is under control in your company?
80%? 60%? 40%?
In my experience 40% is a common estimate.
When I ask why the number is so low, I hear many of the following explanations:
- The systems in place are complicated and require too much effort for even routine and repeatable purchases
- Stakeholders often complain that procurement has too many rules and steps and this makes it challenging to buy needed products and services
- Stakeholders submit requests with weak specifications that require endless follow up to get the information needed to execute the RFP
- Information systems don’t provide easy access to key data metrics across the organization
- Financial systems aren’t set up to facilitate drilling down to the SKU, item or commodity level
- Verifying negotiated savings is often a time-consuming task with multiple queries and cutting and pasting into spreadsheets
- Data mining of contracts is nearly impossible because a central repository doesn’t exist
- Communication capabilities in existing tools are limited so reliance on common email systems are cumbersome at best
I am sure you and I could add a dozen more reasons to this list.
It is easy to understand why spend owners develop offline tools to manage costs because the existing systems create obstacles that hinder efficiency and effectiveness.
Procurement teams create shortcut methods to execute routine buys because they can’t afford to spend the time with tools designed primarily for massive purchases.
People like stuff that works.
Overwhelmed and demoralized are the terms I hear most often from procurement professionals who know there is a better way but are saddled with outdated systems and tools.
In my experience, companies that made the following changes “suddenly” found that spend under control jumped dramatically:
- Better communication between stakeholders and procurement teams became a priority.
- Tools that drive efficient and effective purchases regardless of the size of the buy were installed.
If you want to motivate people, take barriers down, give people the tools to succeed and make it easy for stakeholders to believe in the process.
If your company is struggling to control spend start questioning the status quo.
Ask better questions, make changes and 2018 will be your best year ever.
Action Step: If you are uncertain where to start the process of change, a procurement professional like myself can provide guidance and expertise to help your organization achieve the results you want.
If you want to go explore this topic in greater detail, please contact me. I invite you to request 30-minute discovery conversation. In my experience the next step will be apparent at the end of the call. I never assume that what I have to offer will be right for everyone, so don’t expect a sales pitch. You can reach me at 973-936-9672.
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©
Commit to taking the next step.
Until Next Time, I Wish You Great Success in Your Business and in Your Life