Annual procurement category buys can yield significant savings with a bit of planning.
Ardent Partners recently released some sobering statistics based on a survey of leading CPOs.
61% of spend is under management and 66% of transactions are contract compliant.
This is valuable information to consider especially if you are preparing annual sourcing purchases.
A client that has diligently worked to increase the spend under management in the past several years found significant savings simply by running an RFP.
Materials that have been sourced from the same supplier for years are easy to overlook especially if they have performed as expected.
The materials in this event are important and used in small amounts in numerous applications for this company.
This makes them easy to overlook.
What motivated the company to bid these materials were some recurring issues that appeared insignificant, but a trend was emerging.
Here is the summary of this annual purchase RFP which was completed in just 7 days from start to end:
- 6 suppliers were invited to bid
- 3 suppliers bid
- 1 round of submissions was held (this was not an auction)
- Realized Savings were 49.6%
The good news is that the company saved a significant amount on these materials.
The unwelcome news is they were left wondering how much had been left on the table in the past 5 or 10 years.
I would like to share some thoughts based on similar client success stories that have been shared:
- Creating a schedule of annual purchases helps prevent contracts from renewing automatically
- Initiate a policy that all annual purchases must be sourced through a formal RFP at a minimum of every 3 years
- Establish a centralized database of supplier issues by category
- Set up reminders for all stakeholders to ensure the required information for bids is collected far in advance of each event
- Invite stakeholders to identify purchases or categories that have not been worked recently
The most important suggestion is to market your successes internally. Don’t be shy.
This will help establish your group’s role in the overall business strategy of the organization.
Any of these steps will yield opportunities.
Doing all of them will ensure successes.
If you don’t have enough time, enlisting the help of an outside consultant with the right tools can help you make this happen.
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) 718-7071 x875. The call will be forwarded to my mobile phone if I am not in my office which is pretty likely.
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.
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Commit to taking the next step.
Until Next Time, I Wish You Great Success in Your Business and in Your Life