This is the third in a five-part series discussing the obstacles and potential paths forward to achieve visibility — essential to any Procurement organization. The series was initiated based upon the following Ardent paper – HERE. In the first and second installments the need for procurement visibility starting with Spend Analysis was discussed. Let’s dive right in and examine the second key area or leading indicator of procurement success as outlined by Ardent: Savings.
Congratulations are in order if you are focused on a Savings initiative. This likely means that you have a solid Spend Analysis program, have most of your spend under management and are seeking to do more.
Doing more, having a bigger influence is predicated on the reputation of procurement within the broader enterprise. Long has the Procurement organization battled the challenge of proving their positive impact, their value to the business. And as the mandate of procurement has grown into activities that are even harder to quantitatively measure, such as the health of relationships, risk reduction, collaboration, increasing supply-base innovation, it would seem that having savings, measured savings, as a bedrock is a foundation of credibility.
Tackling a Savings Management initiative often means dealing with more than a single buying process. So it can spiral in terms of complexity. However, having a solution in place that facilitates supplier negotiations and can be used to enable the systematic capture and reporting of savings is the first step to define a program that includes buy-in from Finance and line-of-business leaders. This means that the Savings Management program can be initiated without completely automating a series of sophisticated calculations!
The Sourcing process that ties to Contract Management and then to downstream buying processes is key to enabling a complete program of Savings Tracking. Some organizations get quite sophisticated in their savings calculations as they grow more comfortable with topics such as cost avoidance and savings vs. the market. However, being able to correlate actual vs. sourced savings for even the most straightforward of categories serves to move the credibility needle forward, forge new organizational relationships (think CPO and CFO alignment) and create momentum for further action.
Similar to a Spend initiative, the start of a Savings Tracking program doesn’t require business process change. However, to have the necessary credibility, it does require consensus building and buy-in from stakeholders outside of procurement. As Ardent points out, formalized Savings Tracking programs are the best method to ensure that savings are actually hitting the bottom line. This reads like success and a move toward best-in-class.
* Join our webinar with Andrew Bartolini, Ardent Partners Managing Partner and Chief Research Officer, on how a modern “supplier-centric” approach to eSourcing has evolved into a strategic advantage.