If you’ve looked everywhere in your search for savings, we have an answer for you. Four, actually.
You’ve picked all the low-hanging fruit and upended every stone. You’ve already delivered mountains of savings, but the business is still asking for more. However, when it comes to procurement sourcing techniques and unit price reductions, it is difficult to find additional savings or ways to control costs.
Except for the four ideas that we outline below:
1. Create more competition among suppliers
The more suppliers you have, the more they’ll fight for your business. When you are part of a network that connects you to millions of suppliers, you will have the opportunity to generate cost-saving competition in key expense categories.
Our experience shows that, by encouraging competition among your suppliers, you can realize 4% to 8% savings through sourcing and 1% to 3% in item cost reductions. Spread those across all your spending, and you’ll see some real impact on the bottom line.
2. Guide users to negotiated pricing—even for tail spend
If your users don’t know about the preferred vendors you have selected or the contracts you have painstakingly negotiated, it doesn’t matter how hard you fought for lower rates. Similarly, if you don’t have an easy way for them to buy high-price/low-volume or low-volume/high-price items, it’s virtually impossible to bring that spending under control.
On the other hand, if you give your users consumer-simple buying tools, a self-guided, three-bids-and-a-buy process, and automated approval workflows, you can keep that spending in check, while taking some work off your desk.
When more of your purchase-order line items originate from approved catalogs and contracts, the result is increased compliance and lower prices—even for those items and services that are unpredictable and unusual.
3. Tackle more spending categories
When you are focused on your key priorities and managing with limited resources, you can’t pay attention to everything all of the time. Leveraging digital sourcing and procurement solutions can free you up to be more strategic, so you can spend less time on current expense categories and have more time for addressing new business needs.
When you are operating with a single, integrated procurement system, you can reduce maverick spend—bringing spending that used to happen outside of procurement protocols back under management.
4. Analyze market costs based on your own history
When you don’t know what your organization is buying, it is difficult to home in on where savings can be found.
On the other hand, if you run your negotiations and transactions through the right procurement solution, you can get a detailed pricing history at the individual, bill-of-materials level. With those resources in hand, it’s easier to negotiate rates and curtail costs in even the most challenging categories.
The search for savings never ends. We are excited to offer you four new places to look. To learn more, visit us online at SAP Ariba solutions for midsize companies. `