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The Journey

Achieve Savings

Good spend data does not guarantee reaching your savings goals
  • 1.
    Choose Your Destination

What is the inspiration for seeking to improve spend management influence? What is the driving force behind trying to impact the spend management function?

  • Shift the focus on promoting alignment with executive strategy towards enhancing the bottom-line
  • Effectively execute and manage a pre-defined wave plan and business case for sourcing both direct and indirect spend
  • Increased awareness of risk to the supply chain requires a stronger focus on spend management and financial controls
  • Recent socioeconomic events have prompted the need to plan for and mitigate disruption to the business operations

Without a comprehensive strategy for how procurement will advance the spend management program, the team will have a steep hill to climb before achieving new value.

  • 2.
    Assemble Your Team

Many procurement organizations, invest most of their time and focus on managing suppliers and ensuring the lines of business are supported.

This is a good start for less mature organizations, but leaves a lot to be desired for a more mature procurement function.

As a procurement organization begins its journey, no matter how mature the business function is, it must take a deeper focus on the team.

  • Category Management: Empowering the sourcing function to influence and guide the business will provide the procurement function a greater level of credibility resulting in a stronger ability to influence decision-making
  • Supply Chain: Engage suppliers, at all levels, in collaborative innovation and business improvement to bring new ideas and value to the business
  • Stakeholders: Collaborating with the lines of business early and often will cement the relationship and trust with procurement, and results in long-term proactive engagement
  • Cross-Functional Leaders: There is often untapped value from the other business functions that influence spend management, such as Finance, Operations, and IT.

The journey is best endured with a team that is all pulling in the same direction.

  • 3.
    Chart The Course

Often, when procurement teams focus on spend management, they prioritize low-hanging fruit or top spend categories.

Certainly, tackling either of those will produce some results. However, in order to truly optimize spend the mature organization take a more holistic approach to this segment of the journey.

Research shows that an organization’s procurement function frequently lacks the type of high-quality, sourcing-ready data. Without it, it is impossible to identify and realize cost savings. The first step is to do a deep data cleanse and spend analysis.

Add the following to strengthen your spend management strategy:

  • A formal business case, sponsored by key stakeholders, to supplement the detailed opportunity assessment
  • Directional strategy for long-term compliance management and supplier development
  • Formalized key performance measures to monitor success and ensure accountability

An effective spend management plan includes a deep focus on the data, the opportunities and the plan. When combined with the right team and effective navigation, a successful journey will result.

  • 4.
    Navigate The Expedition
The journey isn’t over yet. With the destination chosen, team prepared, and a detailed course plotted, it’s time to achieve improved spend management.
To do so, the procurement organization is going to need to employ several tactics to achieve its goals.
  • Formalize and deploy a comprehensive sourcing methodology to allow the sourcing teams to effectively execute any sourcing project
  • Employ market intelligence as it relates to supply chain markets, categories and commodities to ensure your sourcing strategy is right for the current economic environment
  • Align spend management objectives with senior management, specifically sourcing strategies, to ensure buy-in and organizational support
  • For true value capture and sustainable contract performance, go beyond unit price savings and consider the total cost of ownership
  • Apply leading change management strategies and communication to prepare the organization for changes in supply and supplier relationships
  • Engage operational planning and management tools to enable new contracting strategies which ensures savings compliance

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