Effective Spend Management: Penny saved is Penny earned

Organizations typically spend anywhere from 20% to 40% of their revenues on their outsourced supplies, depending upon the industries. The purchasing team has a direct role to play in leveraging spend across broad categories like Raw material, Packaging, Maintenance Repair & Operations (MRO), Logistics, Admin, IT, Marketing. Large organizations typically have hundreds or even thousands of suppliers catering to a specific purchase category. When interacting with most Purchase managers on revisiting the current supplier base, it's a common thing to hear: can't switch suppliers, most of the suppliers are strategic, additional suppliers are to cover up for the risk, we are purchasing at the best prices. Oh! really!

Few questions that organizations need to ask:

• Do we have adequate spend visibility across suppliers-categories-geographies-divisions. Is sourcing missing the strategy and planning horizon information about the upcoming years? Is sourcing in constant talking and complete alignment with the other functions?
• Do we have a stratified map of categories concerning profit impact and risk?
• Do we have the optimum number of suppliers for each category, do we need to remove or add suppliers into our purchase system. Should we reconsider dealing with long list of suppliers holding the far tail of the spend. Do we have the optimum number of suppliers for each category, do we need to remove or add suppliers into our purchase system. Should we reconsider dealing with a long list of suppliers holding the far tail of the spend?
• Do we currently have effective supplier-market intelligence and an information repository for a purchase category?
• Are we dealing with the right suppliers across categories and getting the right price and the competitive purchase value. Should we review the geographical factors?
• Can we increase leverage for category-spend and derive the best value out of supplier- partners.
• Are our design requirements for purchase over-specified? Can we redefine the specifications?
• What should be the scoring criteria to measure supplier performance?
• Can we relook into the current supplier contracts and the associated risks?
• Can we look into a business process reengineering exercise in Purchase & Procurement adopting IT as an enabler to perform commerce with suppliers at the best possible efficiencies?
• Do we have a regular risk mitigation process for supplies?
• Can we look into initiating strategic partnership programs with the suppliers for certain spend categories.

Savings are incidental when an organization can have a clear vision and roadmap of its purchase function, spend-visibility across all categories, with a clean list of vital few benchmark suppliers ever raising the bar of performance and participating in the chain as true partners.

Try ExxOptimus's proven skills in bringing the best out of Purchase across industries. We can look into an organization's current purchase state, digital foot-print, supplier ecosystem, AP data, challenges and can provide advisory as well as drive and implement business transformation as per the management's requirements and constraints.