There are many approaches on how you can cut costs, manage your suppliers and efficiently structure the demand of your Internal Buyers.
So, what are the main Strategic Initiatives you can implement in your organization?
Here are 5 Strategic Initiatives, which have the highest impact on managing your suppliers, cutting your long-term total cost of ownership costs.
They’re more productive and efficient in managing your overall Sourcing and Procurement processes within your organization:
1) Avoid Spend where the Internal Buyers are not using the goods or services: once you make a long list of all the spend within your organization and/or the Internal Buyers come proactively to you and say they do not need a certain good or service, make sure you get out of the agreement as soon as possible and find approaches with the supplier to avoid costs, where services or goods are simply not being used.
2) Bundle the procurement processes: in procurement, it is all about optimizing processes e.g. bundling invoices or bundling purchasing orders.
Make sure your bundle as much as possible, aim at EOM (End-of-Month), because a Purchase Order to finally receiving a service/good can cost up to € 150, so the more you bundle the more you will avoid productivity costs within your organisation,
see reference: https://bizfluent.com/info-8710547-average-cost-process-purchase-order.html
3) Start calculating the total cost of ownership costs: avoid the principle old price vs. new price.
Go into depth and take a model from the reference: https://www.cio.com/article/3005705/software/calculating-the-total-cost-of-ownership-for-enterprise-software.html , to see what actual costs you have when you work with IT-Spend or Suppliers.
This framework will help you in the future to also take the costs into account like “Retirement Costs”, which is rarely looked at in organizations.
4) Set contracts with long-term suppliers who is selling services or products for years. Once you have chosen the spend you have with a certain supplier, make a contract with the company.
Why? You will have better conditions and a motivated supplier, as there is finally a contract in place and the company can communicate this within their organization, a contract where others within your organization can recall the contract data.
I wrote an article about this topic on how to implement this, please feel free to read the article: https://www.linkedin.com/pulse/top-3-ways-implementing-professional-contract-management-philip-david/
5) Eliminate Maverick Buying: reduce this by working hand-in-hand with the Internal Buyers that they overlap you and work directly with the Supplier without including you in the Sourcing & Procurement processes. Make sure that you communicate that this will not be a win-win situation for the organization and that this will harm the cash flow of the entire organization which both of the parties work for. You will probably have this already included in your corporate procurement guidelines, if not make sure you start to tangle this problem.
Now it is up to you to lead this and start implementing these Strategic Initiatives. For more information on the topics you can contact me at: https://www.linkedin.com/in/philipdavidconsulting/
I coach Sourcing and Procurement Professionals to develop their Career and lead Project in the area of Sourcing & Procurement to reduce long-term Total Cost of Ownership Costs.
You will also find me in the Network: RapidKnowHow: https://www.rapidknowhow.com/ where you can learn more a transfering your know-how as a leader in business.
I am looking forward in connecting with you!
With best regards,
Philip David MBA specializes in crafting your breakthrough service sourcing strategy, evaluating and choosing your strategic service providers, developing your business case for optimizing your total service cost of ownership and leading your implementation project for delivering sustainable results rapidly.
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