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Sustainable cost reduction in procurement

by | March 21, 2018

Achieving a sustainable cost reduction in procurement is not easy. Companies are under a lot of pressure to be extremely efficient and to cut costs. Significant cost savings can be achieved if different key factors within the procurement process are taken into consideration. This usually depends on the ability of the CPO to inspire the workforce to collaborate for a more cost-effective procurement. Good management of the Purchasing Department is crucial to a profitable company and procurement savings can only be beneficial. There is a considerable number of ways to make procurement savings; the managers, as well as the entire staff should be aware of them and should be trained in good purchasing. A cost-effective procurement process would help organizations make considerable savings every year. Since cost reduction is still the major goal of procurement – 78% – (Deloitte Global CPO Survey 2018), spend analysis combined with a clear plan of action is one of the most effective ways to impact profit.

Ways of cost reduction:

  1. Be aware of your suppliers – review their discounts and prices periodically, in order to get the most out of their offers. You must have an overview of all vendors if you want to achieve cost reductions in procurement.
  2. Centralise procurement – The rationalised supplier base under a centralised procurement strategy leads to increased competition among suppliers and reduced supply costs. It also helps in strategic supplier relationship management.
  3. Using e-procurement technology – This costs money at first, but by speeding up and simplifying purchasing, savings should be made.
Saving costs often means saving time! Time that can be used for strengthening relationships with strategic suppliers, developing and driving innovative business ideas, or exploring new products and markets. Our approach combines next generation, machine learning spend analysis with our experienced sourcing and transformation consultants. Together, we can rapidly collate, cleanse and understand your spend and then plan and deliver a strategy to complete the opportunities. Our projects typically complete an analysis within six weeks and start delivering cost savings within eight to twelve weeks, depending on complexity.