Supply Excellence — 5 Steps to Tighten Your Company’s (Money) Belt

5 Steps to Tighten Your Company’s (Money) Belt

April 17th, 2008 · by Jon Stevens · No Comments · best practices, contract management, costing, sourcing, spend analysis, supply management

If it’s not the inflation numbers scaring you, it’s the hiring numbers. Or is it the weak dollar? Retail numbers? Fuel costs? Pick your individual poison or mix them all together in a perfect economic storm…one way or another your business is likely either looking to grow revenues or cut costs. But obviously in a weak economy - when increasing revenues is difficult or impossible - increasing efficiency and cutting spend is the logical way to go.

Although there are always internal factors (budgets, goals, executive buy in, etc.) that guide how and how deep your spend management efforts go, we’ve found the most successful programs typically follow these steps:

Opportunity Assessment - Without first identifying how much you’re spending and on what, you could be making ineffective or even dangerous decisions. Analyzing spend within each category and identifying areas that offer the best opportunities to realize savings is the right way to start. Opportunities for savings can be triggered by a host of factors including contract expiration, changes in business or legislations, client needs, market forces and supplier relationships. So you want to be certain you are aiming your resources in the direction of the greatest potential savings or improvement.
Strategy Selection - You’ve identified where you think the potential opportunities lie, now you need to recheck the numbers with an eye on that category’s complexity to make sure you’re on the right path.
Sourcing Negotiation - Identifying, engaging and aligning internal stakeholders before, during and after sourcing events is key to negotiating with your suppliers. In fact, a more collaborative negotiation process is moving out of the realm of idealism and into real world best practices.
Implement, Contract & Execute - “Savings” aren’t worth anything if your process lets them slip through the cracks. Your hard work will never make it to the bottom line if your buyers can’t find and use the negotiated prices. So make sure you can search, manage and leverage your contracts.
Monitor - Step 1 was all about measuring what you’d done in the past. Now close the loop and make sure your process feeds your quantitative and qualitative data back into the system. Having that visibility into your spend will help you weather this storm…and leave you in great shape to grow when the economy rebounds.

Jon Stevens is the Vice President and General Manager of Ariba Consulting. Before joining Ariba, Jon was a Director in the Consumer Markets and Supply Chain Practices at Arthur Andersen.

Email Forward & Bookmarks