Procurement Cost Reductions without Cutting Heads – A Welcome Solution for the Bottom Line
CPOs and CFOs are often charged with reducing costs and cutting heads is frequently the solution to improve the bottom line.
Unfortunately, headcount reductions often lead to other unfavorable outcomes when sales aren’t meeting expectations.
Obviously, time and hard-cost savings help organizations to meet bottom line goals.
I have spoken to many procurement professionals this year that want to update their systems and processes but they are being held back by one overriding issue.
They can’t seem to find the time to evaluate alternative solutions or document the anticipated benefits.
Life is often this way. We live with problems until they become so overwhelming that we can’t go on doing things the same way.
I have been in this boat many times on a personal and professional level.
It often took a lot less time to find and evaluate solutions than I imagined.
I love the Pareto principle, 80% of the effects come from 20% of the causes.
In most situations you won’t find a perfect solution that will solve all of your issues. Find a solution that will get you 80% of the way with 20% of the effort and suddenly the time issue disappears.
eSourcing solutions are typically great at automating repetitive tasks. This is a great place to start your evaluation.
Once the tasks that can be automated are identified, I like to quantify how many hours per event that can be saved.
Here are just a handful of the issues that organizations I spoke with this year wanted to automate.
- Suppliers and vendors that participated in multiple events had to resubmit base information for each event. This information then had to be summarized manually after reviewing the input.
- Requests for updated documentation from suppliers and vendors had to be handled individually, typically via email. Tracking the documents received was done using spreadsheets. Additional follow-up was done with emails and phone calls.
- Vendors are required to submit bids on spreadsheets and then attach them to their submission along with any other relevant supporting documentation. The analysis and summary report is then created by combining each individual spreadsheet into the master.
- Multiple reports are manually created for each event. This is especially cumbersome when certain stakeholders expect to see the information in a pre-determined format they like.
- Some contracts renew automatically without review or renegotiation. This happens a lot more frequently than most people would like to admit.
- Total spend by item, SKU or commodity is tracked in offline systems that are prone to error.
Each of these overall issues represent dozens of sub issues that eat up time.
Automating any of these tasks will save significant hours.
One organization determined that they could free up 2 people just by moving from offline systems to an eSourcing RFP platform.
The time saved could then be redirected to more strategic tasks like supplier collaboration, stakeholder education and training and spend analysis. Spending time on these challenges will help you to identify hard-cost savings.
While your company may not free up 2 people, the benefits from automating any repetitive part of the procurement process are significant. Saving 40% or more of the processing and analysis time is common.
If you still don’t think you have time to make the analysis you will be very surprised how little time is needed to evaluate systems that can automate part or parts of your procurement process.
Most people can rattle off 10 things they would like to change. If you can do that, then determining the potential savings through automation can be done in a matter of hours.
Action Step: Finding the right tools for your needs can be a challenging process but it doesn’t have to be. If you are uncertain where to start a procurement professional like myself can provide guidance and expertise to help your organization achieve the results you need. If you want to go explore this topic in greater detail, please contact me.
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 973-936-9672.
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