Three guidelines can help companies spend better:
• Know the demand. Leading companies streamline purchasing. By examining specific categories, procurement teams can put a spotlight on unnecessary spending.
• Create to cost. World-class purchasing teams also make sure design teams are not over engineering new products. They embed procurement managers in the R&D team to assess the cost of different components and consider alternative options that may be more cost-effective.
• Reduction. Successful companies evaluate the total cost of owning expensive items. Paying more upfront can be the more economical choice if savings over time outweigh an initial higher cost. They examine their supply chain regularly to understand whether it makes more sense to produce items in-house or buy them from someone else. And they collaborate closely with suppliers to reduce extra costs by reducing supplier complexity. Closing the loop to lock in savings
All too often, companies can reap big procurement savings on paper, but they leak out of the system. The reason is clear. Procurement generates savings at the category level, but business-unit managers spend at the budget level. Since most companies don’t have transparent systems that map categories to budgets, managers often take savings from one category and spend them elsewhere.
By helping your company generate and actually capture the savings, we close the gap of uncertainty and lock in the savings you wish to achieve.