Sourcing Accomplished...Now What? Best Practices to Make Your Sourcing Savings Stick
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Transcript of Sourcing Accomplished...Now What? Best Practices to Make Your Sourcing Savings Stick
Sourcing Accomplished…NOW WHAT?
Best Practices to Make Your Savings Stick
Presented by Jake Wojcik, Senior Vice President
Don’t Be Naïve
There is a BIG gap betweeb projected savings and actual savings.
• Only 34% of projected procurement savings is actually getting booked (Aberdeen)
• 60% of buying organizations were not able to fully realize savings due to implementation challenges (SpendMatters)
• Typically, only 67% of spend in managed categories goes to the preferred supplier (ISG)
What’s Causing the Savings Leakage?
Lack of Spend Visibility
Poor Contracting
Poor Implementation
Strategy
Budgetary Behaviors
Limited CategoryStrategy
NonexistentDemandStrategy
Poor SupplierManagement
Strategy
The Pain Doesn’t End With Savings Leakage…
• Loss of credibility with key stakeholders
• Strained vendor relationships
• Reduced ability to gain or expand influence within the organization
How Do We Plug The Leaks?
1. Develop the category strategy before the RFP
2. Manage compliance with Spend Visibility
3. Commit to a lifestyle change
Step 1: Develop the Category Strategy before the RFP
Savings Measurement
Performance Mgmt &
Governance
Supplier MgmtStrategy
Demand Optimization
Data Strategy / Data Rights
Implementation
Category Strategy
Define how are savings will be measured
• Actual baselines
• Estimated baselines
• Treatment of value-added services
• Intangible benefits
Savings Measurement
Ask: What data is required & what are the best sources?
Savings Measurement
Performance Mgmt &
Governance
Supplier MgmtStrategy
Demand Optimization
Data Strategy / Data Rights
Implementation
Category Strategy
• What are the key category metrics, KPIs and performance targets?
• What dashboards are required?
• What is the frequency of reviews and how will issues be handled?
• How will both projected and actual savings be treated in the budget?
Savings Measurement
Performance Mgmt &
Governance
Supplier MgmtStrategy
Demand Optimization
Data Strategy / Data Rights
Implementation
Category Strategy
Ask: What data is required & what are the best sources?
Performance Management & Governance
• What suppliers will be involved in reviews?
• How often will they occur?
• What will be discussed?
• What type of supplier / market intelligencewill be required?
Savings Measurement
Performance Mgmt &
Governance
Supplier MgmtStrategy
Demand Optimization
Data Strategy / Data Rights
Implementation
Category Strategy
Ask: What data is required & what are the best sources?
Supplier Management Strategy
• What are the largest drivers for demand in the category?
• How can demand be measured and analyzed-- for example, by buyer, item, item group, location?
• What are the typical approaches for managing / controlling client demand?
Savings Measurement
Performance Mgmt &
Governance
Supplier MgmtStrategy
Demand Optimization
Data Strategy / Data Rights
Implementation
Category Strategy
Ask: What data is required & what are the best sources?
Demand Optimization
Secure Data Rights
• Make sure this is clearly defined in the supplier contract
• What type of information is to be provided?
• At what frequency?
• In what format?
Savings Measurement
Performance Mgmt &
Governance
Supplier MgmtStrategy
Demand Optimization
Data Strategy / Data Rights
Implementation
Category Strategy
Data Strategy & Data Rights
Develop the transition plan early
• Engage cross-functional stakeholders to ensure thereare no surprises
• Identify any roadbloacks or red flags BEFORE awarding the supplier
• Leverage supplier implementation resources toPMO the transition plan
• Identify contractual carrots / sticks (rewards andpenalties) related to a successful transition
Savings Measurement
Performance Mgmt &
Governance
Supplier MgmtStrategy
Demand Optimization
Data Strategy / Data Rights
Implementation
Category Strategy
Implementation
Step 2: Manage Compliance with Spend Visibility
• Understand and track your “impact rate”
• Develop a proactive compliance strategy
• Implement analytical tools / dashboards to manage top priority categories
Understand & Track Your Impact Rate
• Impact rate is Compliant Spend / Addressable Spend
• To improve impact rate, increase the number of managed categories and increase compliance
Develop Proactive Compliance Strategy
• Identify & prioritize topunmanaged spend categories
• Identify & address top non-compliant spend categories / owners
• Use technology to automate the tactical category management activities• Develop a regular cadence & consistent template for reporting savings to
executive management
Implement Analytical Tools / Dashboards ToManage Top Priority Categories
Dashboard shows office supplies spending by pricing tier as well as compliance to core
list items
Order analytics tab shows details on average order size, order size trends, and details by
buyer
Savings tab compares baseline prices to new prices
New LifestyleLJSKJ
NEXT EXIT
Finally – Commit to a Lifestyle Change
• No shortcuts!
• Requires investment: FTEs, $$, and Leadership time
• Position stakeholdersas internal champions
Recap – How to Make Your Savings Stick
☑ Develop category / savings management strategy before releasing the RFP
☑ Manage compliance with Spend Visibility
☑ Commit to a lifestyle change