How much cost reduction low hanging fruit does your company have and what are you doing to get it?
Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing.
There are many companies with large supply chain/procurement teams that have spent years going after the easy cost reduction/increased value or low hanging fruit. Many companies, however, even very large companies have procurement staffs with barely enough bandwidth to monitor a portion of the overall spend. For these companies, the need to look at low labor areas of spend is crucial and is a great place to start to focus on, especially if you have a strategic sourcing partner to work with.
Standardize the specification – One way to quickly find ways to reduce costs, especially in companies where there many departments or locations, is the standardization of the basic purchases made. By standardizing what your company buys you can achieve two things that will help in reducing cost. First, you will ensure that groups are not buying at a price or quality level that is outside the norm of what the rest of the company is doing. By standardizing the specification it is also easier to track how your company is doing against prices they should be getting. This leads right into the second advantage which is being able to consolidate all of your spend in one bigger level that allows for stronger National or Regional contracts. This may not add up to the company’s largest savings opportunities but they are not resource intensive and can be achieved quickly.
Quality Needs and Non-branded items – In the process of standardizing the specifications for low hanging fruit categories, another way to affect more value is to evaluate whether the items being purchased fit the true needs of the organization. Does your company need a $2,500/month multi-functional device when a $1,200 one will do? This is also a time to determine whether the need for branded items could be replaced with non-branded items. The quality of non-branded items such as generic drugs, paper products, and small appliances has increased greatly in the past few years and because of that companies are beginning to look more and more to non-branded products for their business needs.
Suppliers: too many, too long – Maybe it’s not your products and services you want to change it is the fact that you have too many suppliers supplying the same thing or maybe you have a supplier who has been supplying you for years without any real accountability. These are also examples of where a procurement department can get great increased value with little effort. The reason for this is because you aren’t changing what you are purchasing and so you know the levels of spend and specification in advance. Armed with that, it becomes a matter of consolidating your vendors or opening up the opportunity to new vendors as the case may be. Either instance can provide very good results without having to change what you are purchasing at all.
If you are looking to put some attention on your low hanging fruit and find yourself without the resources to even go after that, please contact a SafeSourcing Customer Service Representative. We have an entire customer services team waiting to assist you today.
We look forward to your comments.