Striking a balance between change management and the desire for cost reduction.
Today’s post is by Dave Wenig, Sr. Vice President of Sales and Services at SafeSourcing, Inc.
For our customers, we are primarily focused on delivering cost savings. Generally, in eProcurement, we aim to provide an apples-to-apples comparison so that our customers can make an award decision relatively easily based on the results of an online RFx Event. We do that very well and average over 24% savings. Sometimes, however, our customer is looking to reduce their category costs while also making changes to what it is that they are purchasing.
The good news is that the goals of reducing costs and making a change are not mutually exclusive. While every situation will be different, here is how one customer of ours recently accomplished both goals. The customer, a retailer, knew that they would be phasing out certain plastic products that use regularly. They have a significant annual spend in this category currently. Their goal was to discontinue the use of plastic and switch to alternative products that are more environmentally friendly including biodegradable and reusable options. Because they had carefully planned this change, we were able to develop a plan to work together to manage the change effectively while still taking full advantage of eProcurement tools to reduce costs along the way. Below is a quick summary of how we did this.
- Reduce the cost of the current plastic products using a live Request for Quote (RFQ)so they are not overpaying for the remainder of their orders. This generated a substantial savings.
- Develop a Request for Proposal (RFP)to attain a better understanding of the specifications, capabilities, and pricing for the alternative products.
- Review the RFP results and establish the specifications for the alternative products that would ultimately replace the plastic products.
- Host an RFQ to compress the pricing for the alternative products
- Test samples for the alternatives, make a decision, and coordinate the roll out of the new products to coincide with the timeline of phasing out the plastic products.
The most important part of this process was the planning. SafeSourcing and the customer coordinated the process and took the steps above in accordance with that plan. In contrast, when we see customers attempt to manage change through the eProcurement process without a plan, we tend to see results that are less impressive. They will likely have savings, and they will likely make a change, but they will not strike the ideal balance between the two.
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